Norfolk Southern Corporation—Century Bonds

Abstract

Norfolk Southern Corporation (NSC), a railway operator, was issuing a $250 million bond with a coupon of 6% and a maturity in 2105. The bonds were added to an existing $300 million 6% debt issue due 2105, which the company first sold in 2005. A bond analyst at Tidal Insurance (Tidal), has heard that the original issue of this century bond was to be $100 million, and it seemed that strong investor demand pushed NSC, to increase the total amount to $250 million. He has to decide whether Tidal should include the NSC bond in its bond portfolio. Excerpt UVA-F-1733 Rev. Aug. 13, 2015 Norfolk Southern Corporation—Century Bonds On Tuesday, August 24, 2010, Fred Vera was drinking a cup of coffee when he picked up the Financial Times and saw the news. Norfolk Southern Corporation (NSC), a railway operator headquartered in Norfolk, Virginia, was issuing a $ 250 million bond with coupon of 6% and a maturity in 2105. The bonds were added to an existing $ 300 million 6% debt issue due 2105 that the company first sold in 2005. He immediately saw a potential investment opportunity and started thinking of the advantages of this century bond for his firm. Vera, a bond analyst at Tidal Insurance (Tidal), had heard that the original issue of this century bond was to be $ 100million, and it seemed that strong investor demand pushed NSC, to increase the total amount to $ 250 million. He had to decide whether Tidal, a regional life insurance company, should include the NSC bond in its bond portfolio. Norfolk Southern Corporation One of the leaders in the transportation industry, NSC controlled a major freight railroad, Norfolk Southern Railway, which operated approximately 21,000 route miles in 22 states and the District of Columbia. It ran the most extensive intermodal network (freight transportation by a combination of train and truck) in the eastern half of the United States. It transported coal and industrial products through its Triple Crown Services unit. Exhibit 1 shows Norfolk Southern Railway's system network. Other businesses in which NSC participated included commercial real estate development, sales and leasing of rail property and equipment, and leasing and management of coal, oil, gas, and other minerals. . . .