PrefBlog

Commerce Split Corp. has announced:

that a proposed capital reorganization plan for the Company was approved at the special meeting of Shareholders held earlier today. The Company believes this reorganization has the potential to significantly increase the value attributed to all shareholders.

The reorganization will provide all shareholders with the ability to elect to:

• 1. Maintain the current investment characteristics of their existing shares (a status quo option), through the Original Commerce Split Fund, or
• 2. Have their existing Priority Equity and/or Class A shares reorganized into a new series of shares (the New Commerce Split Fund) that would potentially provide greater distribution and capital growth potential, especially if the common shares of CIBC increase over the remaining 5 year term of the Fund.

Under the New Commerce Split Fund, holders of the existing Priority Equity Shares that elect to transfer into the New Commerce Split Fund will receive the following securities for each Priority Equity share held at the close of business on the record date (to be determined):

One $5.00 Class I Preferred Share – paying fixed cumulative preferential monthly dividends to yield 7.50% per annum on the $5.00 notional issue price and having a repayment objective on December 1, 2014 or such other date as the Company may be terminated (the “Termination Date”) of $5.00;

One $5.00 Class II Preferred Share – paying distributions to yield 7.50% per annum on the $5.00 notional issue price if and when the net asset value per Unit exceeds $12.50 and having a repayment objective on the Termination Date of $5.00;

One-half 2011 Warrant – each full 2011 Warrant can be exercised to purchase one Unit for an exercise price of $10.00 at specified times until February 28, 2011; and

One 2012 Warrant – each 2012 Warrant can be exercised to purchase one Unit for an exercise price of $12.50 at specified times until February 28, 2012.

Holders of the existing Class A Shares would receive a Capital share for each share held and would continue to participate in any net asset value growth over $10.00 per Unit.

It is expected that Class I Preferred Shares, Class II Preferred Shares, Capital Shares, 2011 Warrants and 2012 Warrants will be issued sometime in March 2010 and will commence trading on the TSX at the opening of trading on such date.

The Company will issue shortly a further press release including all key dates related to the election process and capital reorganization.

I had previously recommended against the plan but nobody ever listens to me. Undeterred, I will now recommend that holders of XMF.PR.A elect to receive holdings in the “Original” group. I challenge all comers to show me a scenario of prices of CIBC common (“CM”) which show that the “New” plan is superior to assigning extant holdings to the “bond” part of their portfolios and buying a few CM shares directly.

XCM.PR.A is not tracked by HIMIPref™.

This entry was posted on Wednesday, February 3rd, 2010 at 8:50 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.