The Canadian Imperial Bank of Commerce (CM) has announced:
it expects to further enhance its capital position by raising a minimum of $2.75 billion of newly issued common equity.
Specifically, CIBC has received written commitments from a group of institutional investors, including Manulife Financial Corporation, Caisse de dépôt et placement du Québec, Cheung Kong (Holdings) Ltd. and OMERS Administration Corporation, to invest, by way of a private placement, $1.5 billion in CIBC common shares. CIBC World Markets Inc. and UBS Securities Canada Inc. acted as joint bookrunners in the private placement.
In addition, CIBC has entered into an agreement with a syndicate of underwriters led by CIBC World Markets Inc. as bookrunner and jointly led by UBS Securities Canada Inc. under which they have agreed to purchase $1.25 billion in CIBC common shares at a price of $67.05.
The press release includes a handy table:
| Tier 1 Ratio Sensitivity to Additional Write-downs on U.S. Residential Real Estate Exposures |
| Capital Raised ($-billion) |
Dec 31/07 Tier 1 Ratio Estimate (1) factoring in $2.4-billion pre-tax writedown |
Tier 1 Ratio Estimate with Hypothetical Additional (2) Write-downs of: |
| $2.0-billion Pre-tax ($1.3-billion after tax) |
$4.0-billion Pre-tax ($2.7-billion after tax)(3) |
| 2.75 |
11.3% |
10.2% |
9.0% |
| 2.94(4) |
11.4% |
10.3% |
9.2% |
| (1) Estimated on a Basel II basis |
| (2) i.e., in addition to the write-downs taken as of December 31/07 described in press release. These numbers are illustrative only. CIBC has no information that would lead it to conclude that any additional material write-downs will be taken. |
| (3) OSFI has announced that as of January 2008 the amount of preferred shares permitted for inclusion in Tier 1 capital has increased from 25% to 30%. The pro-forma impact of this change is to increase the Tier 1 ratio to 9.1% in the $2.75 billion capital raised case and 9.3% in the $2.94 billion capital raised case. |
| (4) $2.94 billion includes the underwriters over-allotment option. |
These are very strong numbers compared with Year-end levels; with the entry of new equity holders kindly offering to take the first loss, the credit watch should probably be cancelled. Now, if only we could be sure that the bank can avoid shooting itself in the foot for another little while!
The bank has the following series of preferred shares: CM.PR.A, CM.PR.D, CM.PR.E, CM.PR.G, CM.PR.H, CM.PR.I, CM.PR.J, CM.PR.P and CM.PR.R.
The above story is the opinion of the author only and it does not reflect
iStockAnalyst opinion. Further, the author is not personally advising you
regarding the suitability of the story for your investment needs. In no event
iStockAnalyst will be liable for any loss or damage including without
limitation, indirect or consequential loss or damage, or any loss or damage
whatsoever arising from or arising out of, or in connection with the use of this
information. Please consult your investment advisor before making any investment
decision.
