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.
Update: DBRS has announced:
CIBC’s ratings remain Under Review with Negative Implications, including all the long-term, short-term and preferred ratings, despite the equity capital injection as concentration risk of counterparty and overall risk management processes of the Bank remain concerns for DBRS.
Update: The bank has released An Investor Presentation, confirming that the private placement was done at $65.26. I have heard, with good reliability, that there was also a 4% commitment fee in that part of the deal, which would make the net price $62.65.
Update, 2008-2-9: The greenshoe was fully exercised:
CIBC (CM: TSX; NYSE) announced today that it completed its previously announced offering of 45,346,130 common shares for aggregate gross proceeds of $2,937,669,337.50.
At today’s closing, CIBC issued 21,441,750 common shares to the public through a bought deal public offering in Canada led by CIBC World Markets Inc. as book runner and jointly led by UBS Securities Canada Inc. The public
offering included 2,796,750 common shares issued upon the exercise, in full, of an over-allotment option granted by CIBC to the underwriters.
CIBC also issued an additional 23,904,380 common shares to a group of institutional investors by private placements.
[…] PrefBlog Canadian Preferred Shares – Data and Discussion « CM Raises Equity Capital […]
Pref shares aside, I am sure there are lots of common shareholders who would have liked the opportunity to buy CM common at $67.05 — a price reached for maybe 90 minutes last Monday.
I understand the private placement was done at $65.26, and also had a 4% committment fee.
So roll that up and smoke it!
[…] Fortunately, there was CM Equity Issue and the OSFI change in issuance limit to fill in the space. […]
[…] from the sample), and apply this discount to the proceeds on conversion and sale. For example, the CIBC recapitalization was done with the help of a private placement at $62.65 net of fees, compared to its previous close […]