Via Rail Seeks Toronto-Montreal Line Partners, Mulls Debt

Updated on

Via Rail Canada Inc. is meeting with pension funds and firms like Bombardier Inc. as potential partners for a C$3 billion ($2.4 billion) track between Toronto and Montreal. It’s also exploring taking on debt if it has to go it alone.

Chief Executive Officer Yves Desjardins-Siciliano plans to meet in coming months with SNC-Lavalin Group Inc., Bombardier and Siemens AG, along with Canadian pension funds like Caisse de depot et placement du Quebec, Ontario Teachers Pension Plan and Ontario Municipal Employees Retirement System. At the same time, the Montreal-based passenger rail service is considering securing funds itself by issuing so-called green bonds, he said.

“We will start by approaching all the usual suspects,” he said in an interview in Toronto on Thursday. “We are scheduling those meetings as we speak over the summer.”

Desjardins-Siciliano is looking to combat falling ridership and a widening deficit by sending trains along Via’s busiest route, with stops in Ottawa, more frequently and more reliably.

That would allow Via to attract more passengers and shrink the subsidy it needs from its sole shareholder, the federal government. But the plan is only possible if Via, which currently shares track with slower moving freight trains, builds its own, the executive said. Its federal subsidy increased 8 percent to C$114.6 million last quarter from a year earlier.

The most likely route is a partnership with private firms or investors, he said. That would see the private partner contributing C$2 billion, likely 10 percent equity and 90 percent debt, in exchange for a period of ownership during which Via would pay a fee for use, he said. The remaining C$1 billion would be from what Via was already going to spend on new train cars.

Green Bonds

Selling green bonds would also be an option because the funds would be used in an environmentally sustainable project, Desjardins-Siciliano said. Ontario sold C$500 million of green bonds last year to fund projects like an extension to Toronto’s subway system.

Desjardins-Siciliano expects return on investment for the project to be in the “mid-teens” and his meetings with companies and financiers in coming weeks will determine how those returns are divided between investors and Via.

“They will have to bid to build the better track, the faster track, the most reliable track, at the lowest cost, considering somebody else is bidding against them,” he said. “Of that double digit return, we will give as little as we have to, and as much as the market will require.”

Created in 1977, Via Rail operates from British Columbia to Nova Scotia. While it serves remote communities such as Churchill, Manitoba, the bulk of its ridership moves between Windsor, Ontario and Quebec City, the country’s main commercial corridor that includes Toronto and Montreal.

(An earlier version of this story corrected the currency conversion in the first paragraph.)

Before it's here, it's on the Bloomberg Terminal. LEARN MORE