The Canadian Imperial Bank of Commerce has announced:
that it had entered into an agreement with a group of underwriters led by CIBC World Markets Inc. for an issue of 16 million Basel III-compliant Non-cumulative Rate Reset Class A Preferred Shares, Series 45 (the “Series 45 Shares”) priced at $25.00 per Series 45 Share to raise gross proceeds of $400 million.
CIBC has granted the underwriters an option to purchase up to an additional four million Series 45 Shares at the same offering price, exercisable at any time up to two days prior to closing. Should the underwriters’ option be fully exercised, the total gross proceeds of the financing will be $500 million.
The Series 45 Shares will yield 4.40% per annum, payable quarterly, as and when declared by the Board of Directors of CIBC, for an initial period ending July 31, 2022. On July 31, 2022, and on July 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 3.38%.
Subject to regulatory approval and certain provisions of the Series 45 Shares, on July 31, 2022 and on July 31 every five years thereafter, CIBC may, at its option, redeem all or any part of the then outstanding Series 45 Shares at par.
Subject to the right of redemption, holders of the Series 45 Shares will have the right to convert their shares into Non-cumulative Floating Rate Class A Preferred Shares, Series 46 (the “Series 46 Shares”), subject to certain conditions, on July 31, 2022 and on July 31 every five years thereafter. Holders of the Series 46 Shares will be entitled to receive a quarterly floating rate dividend, as and when declared by the Board of Directors of CIBC, equal to the three-month Government of Canada Treasury Bill yield plus 3.38%.
Holders of the Series 46 Shares may convert their Series 46 Shares into Series 45 Shares, subject to certain conditions, on July 31, 2027 and on July 31 every five years thereafter.
The expected closing date is June 2, 2017. CIBC will make an application to list the Series 45 Shares as of the closing date on the Toronto Stock Exchange. The net proceeds of this offering will be used for general purposes of CIBC.
Later, they announced:
that as a result of strong investor demand for its previously announced domestic public offering of non-cumulative Rate Reset Class A Preferred Shares, Series 45, the size of the offering has been increased to 32 million shares. The gross proceeds of the offering will now be $800 million. The offering will be underwritten by a syndicate led by CIBC World Markets Inc. The expected closing date is June 2, 2017.
The net proceeds from this transaction will be used for general purposes of CIBC.
A good sized issue!
Implied Volatility analysis for FixedResets suggests the issue may be a little expensive:
Click for Big
The theoretical price implied by the above calculation is 24.76.