PrefBlog

Commerce Split Corp. has announced:

was launched on February 16, 2007 and at that time the price of CIBC common shares was $102.15. As of March 24, 2008 the price of CIBC commons shares has declined to $66.80 or a drop of 35% since the inception of the fund. This sharp decline has resulted in the fund’s net asset value being reduced significantly and has required the Company to implement the Priority Equity Protection Plan in accordance with the prospectus. This plan was implemented to maintain a preferred share coverage ratio of 125% as defined in the prospectus. The Company has executed trades to remain in compliance with the Protection Plan by purchasing permitted repayment securities. Currently, the portfolio has over $2.60 (a decrease from $4.25 per unit – please refer to the Press Release dated March 19, 2008 Portfolio Update) in notional value of permitted repayment securities per unit (a unit being 1 Priority Equity Share plus 1 Class A Share) thereby reducing the risk to Priority Equity shareholders to any further declines in the price of CIBC common shares.

The Company’s investment portfolio also has approximately $11.09 in CIBC exposure per unit which is an increase of $1.82 per unit from the last Portfolio Update on March 19, 2008. There is $9.93 per unit in CIBC common shares and the equivalent of $1.16 per unit in exposure through long CIBC call options, which provides exposure to any potential upside in the value of CIBC common shares. The Company has written call options on a portion of these positions at higher levels.

The Company’s portfolio is continually rebalanced based on market conditions to provide both security for Priority Equity shareholders and upside potential for Class A shareholders. The Company may buy or sell additional shares of CIBC, the permitted repayment securities, and or option positions based on market conditions provided that the Company remains in compliance with the Priority Equity Protection Plan.

Dividends on the Capital Units have been suspended, but the Prefs are still paying. The last Capital Unit distribution was in January.

Quadravest has described the PEPP in a previous release.

XCM.PR.A is not tracked by HIMIPref™. They are not rated by any rating organization.

Update, 2008-4-1: The company has announced:

The Company’s investment portfolio has approximately $12.24 in CIBC exposure per unit which is an increase of approximately 10% in exposure per unit from the last Portfolio Update on March 25, 2008. This exposure consists of $11.05 per unit in CIBC common shares and the equivalent of $1.19 per unit in exposure through long CIBC call options. The Company has written call options on a portion of these positions at higher levels. The Company retains $1.69 in notional value of Permitted Repayment Securities for the protection of Priority Equity Shareholders Capital.

The Company’s current net asset value as at the close on April 1, 2008 exceeds the $12.50 threshold for payment of capital share dividends and is no longer in a position that would require the Company to set aside funds into the repayment securities.

This entry was posted on Tuesday, March 25th, 2008 at 5:42 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.