The Canadian Imperial Bank of Commerce has announced:
that it has received confirmation from the Office of the Superintendent of Financial Institutions (OSFI) that its non-cumulative Class A preferred shares, Series 26, 27 and 29 (the Convertible Preferred Shares) will be treated as non-viability contingent capital (NVCC) for the purposes of determining regulatory capital under Basel III.
On May 26, 2011, CIBC announced that it intended to seek to have the Convertible Preferred Shares treated as NVCC once OSFI finalized its advisory on NVCC (the NVCC Advisory). OSFI published the final NVCC Advisory on August 16, 2011.
In connection with receiving this confirmation, CIBC has taken the following actions:
- (i) CIBC has irrevocably renounced its rights to convert the Convertible Preferred Shares into CIBC common shares by way of a deed poll except in circumstances that would be a “Trigger Event” as described in the NVCC Advisory; and
- (ii) CIBC has provided an undertaking to OSFI that CIBC will immediately exercise its rights to convert each of the Convertible Preferred Shares into CIBC common shares upon the occurrence of a Trigger Event.
These are unilateral actions taken at CIBC’s discretion and do not change any of the other terms of the Convertible Preferred Shares including CIBC’s redemption rights.
By renouncing CIBC’s conversion rights except upon the occurrence of a Trigger Event, the Convertible Preferred Shares will continue to not be dilutive to earnings per share following the adoption of International Financial Reporting Standards (IFRS) commencing November 1, 2011 nor for the portion of the IFRS comparative year ending October 31, 2011 that is subsequent to August 16, 2011 the date the conversion rights were renounced.
CIBC announcement that it would seek this status was previously reported on PrefBlog. I discussed the probable rationale for their action in this matter in the June, 2011, edition of PrefLetter.
CM.PR.D, CM.PR.E and CM.PR.G are all tracked by HIMIPref™. All are currently assigned to the PerpetualPremium subindex.
OK, so this gives us an opportunity to estimate what the NVCCC clause is worth in terms of added yield. How do these issue compare with other CIBC perpetuals without the clause?
I get a sense the NVCCC clause, although valuable to the bank, has almost no market value impact to the retail client. Am I right? Does this increase the odds that other issues can be made NVCCC with a 1c increase in the dividend?
[…] third CM issue to receive NVCC status was CM.PR.G (as reported in August), which is not mentioned in the release. I suspect that this is simply a careless oversight which […]
[…] to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: NVCC Status Confirmed and the January, February, March and June, 2011, editions of PrefLetter for the rationale behind […]
[…] to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: NVCC Status Confirmed and the January, February, March and June, 2011, editions of PrefLetter for the rationale behind […]
[…] to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: NVCC Status Confirmed and the January, February, March and June, 2011, editions of PrefLetter for the rationale behind […]
[…] to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: NVCC Status Confirmed and the January, February, March and June, 2011, editions of PrefLetter for the rationale behind […]
[…] This results in the CM PerpetualPremiums, CM.PR.D (Series 26) and CM.PR.E (Series 27) being downgraded from P-2 to P-2(low). CM.PR.G (Series 29) can be taken as equivalent although it is not rated by S&P, oddly enough. These are the issues which have been recognized by OSFI has having a good enough NVCC clause. […]
[…] to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: NVCC Status Confirmed and the January, February, March and June, 2011, editions of PrefLetter for the rationale behind […]
[…] to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: NVCC Status Confirmed and the January, February, March and June, 2011, editions of PrefLetter for the rationale behind […]
[…] to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: NVCC Status Confirmed and the January, February, March and June, 2011, editions of PrefLetter for the rationale behind […]
[…] to the call schedule explicitly defined. See OSFI Does Not Grandfather Extant Tier 1 Capital, CM.PR.D, CM.PR.E, CM.PR.G: NVCC Status Confirmed and the January, February, March and June, 2011, editions of PrefLetter for the rationale behind […]