CIBC announces transaction that will significantly limit U.S. residential real estate exposure



    Portfolio investment by Cerberus will allow CIBC to reduce downside
    risk while preserving upside potential

    TORONTO, Oct. 3 /CNW/ - CIBC announced today that it will be further
strengthening its balance sheet by significantly reducing its remaining
exposure to the U.S. residential real estate market.
    Following the completion of a competitive bidding process, a fund
arranged by Cerberus Capital Management, L.P., has agreed to invest US$1.050
billion in cash in CIBC's U.S. residential real estate portfolio. The fair
value of the reference portfolio as of the effective date of the transaction,
June 30, 2008, was US$1.186 billion. As of the end of CIBC's fiscal third
quarter, July 31, 2008, the value was US$1.075 billion. The fund has agreed to
acquire US$1.050 billion of amortizing senior notes, which will have a capped
return, payable in cash. The recourse on the notes will be limited to the
assets in the reference portfolio. In addition, CIBC will retain 100% of the
potential upside on the portfolio following repayment of the notes. The
reference portfolio consists of U.S. residential mortgage-backed securities
(RMBS) and collateralized debt obligations (CDOs) of RMBS. These securities
are part of CIBC's legacy structured credit runoff portfolio.
    As an all-cash deal, CIBC will not be providing any of the financing to
the senior notes investor and will not be providing any performance guarantee
in respect of the portfolio. Interest and principal payments on the senior
notes will be paid from the portfolio only if the RMBS and CDOs of RMBS
perform. Following the repayment of the notes, CIBC will retain all future
cash flows of the portfolio.
    As a further potential enhancement to CIBC's upside, CIBC has retained
the ability to call the notes at the end of three years upon payment of
accrued and unpaid interest, remaining principal and a fixed redemption
premium.
    Under the transaction, CIBC will retain ownership of the assets. CIBC
will also keep all financial guarantor insurance contracts and related rights
associated with the portfolio.
    "This transaction sets a floor under CIBC's exposure to the U.S.
residential mortgage market," said CIBC President and CEO Gerry McCaughey. "At
the same time, retaining ownership of these securities, combined with the
option regarding the timing of any redemption of this note, provides us with
important flexibility to benefit from a future recovery in the cash flows of
these securities."
    CIBC's Tier 1 capital ratio at July 31, 2008 was 9.8%. Giving effect to a
US$300 million preferred share issue completed in September, CIBC's Tier 1
capital ratio at July 31st on a pro forma basis was approximately 10.1%, well
above CIBC's target of 8.5%.
    This transaction, at inception, is expected to have a positive impact on
CIBC's Tier 1 capital ratio of 13 basis points. More importantly, this
transaction also significantly reduces CIBC's future Tier 1 capital exposure
to the U.S. residential real estate market.
    In a scenario where the value of the U.S. residential real estate
securities falls to zero and recoveries from financial guarantors on U.S.
residential real estate insurance contracts are approximately 15%, there would
be no further exposure to CIBC's Tier 1 ratio pro forma July 31.
    If recoveries from financial guarantors on U.S. residential real estate
insurance contracts were 30%, this would have a positive impact on CIBC's Tier
1 ratio of approximately 36 basis points.
    Assuming an unlikely and hypothetical scenario where the value of the
U.S. residential real estate securities falls to zero and there are no
recoveries from financial guarantors related to these securities, the impact
on CIBC's Tier 1 capital ratio on a pro forma basis at July 31st would be
limited to a decrease of approximately 0.45% related to losses on U.S.
residential real estate holdings.
    "Our capital position is strong and our actions to reduce risk in our
structured credit portfolio further that strength," said McCaughey. "In
addition, retaining the right to future recoveries provides the potential for
further enhancement to CIBC's performance."
    McCaughey concluded, "I would like to thank the professionals at Cerberus
Capital for their commitment and diligence in this process. Together, we were
able to structure a transaction that is advantageous to both parties."

    ---

    CIBC will hold a conference call for analysts and investors to discuss
this announcement today at 8:30 am (EST). An investor presentation and live
audiocast will be available in English at www.cibc.com, About CIBC.
Participants can also listen to the conference call in English (416-340-2217
in Toronto, or toll-free 1-866-696-5910 throughout the rest of North America,
passcode 3272373 followed by the number sign). A telephone replay will be
available (416-695-5800 or 1-800-408-3053, passcode 3272373 followed by the
number sign) until midnight (EST) on October 17, 2008.

    From time to time, CIBC makes written or oral forward-looking statements
within the meaning of certain securities laws, including in this press
release, in other filings with Canadian securities regulators or the
U.S.Securities and Exchange Commission and in other communications. These
statements include, but are not limited to, statements about the transaction
with a fund arranged by Cerberus Capital Management, L.P. referred to in this
press release. Forward-looking statements are typically identified by the
words "believe", "expect","anticipate", "intend", "estimate" and other similar
expressions or future or conditional verbs such as "will", "should", "would"
and "could". By their nature, these statements require CIBC to make
assumptions and are subject to inherent risks and uncertainties that may be
general or specific. A variety of factors, many of which are beyond CIBC's
control, affect CIBC's operations, performance and results, and could cause
actual results to differ materially from the expectations expressed in any of
CIBC's forward-looking statements.
    These factors include: credit, market, liquidity, strategic, operational,
reputation and legal, regulatory and environmental risk; legislative or
regulatory developments in the jurisdictions where CIBC operates; amendments
to, and interpretations of, risk-based capital guidelines and reporting
instructions; the resolution of legal proceedings and related matters; the
effect of changes to accounting standards, rules and interpretations; changes
in CIBC's estimates of reserves and allowances; changes in tax laws; that
CIBC's estimate of sustainable effective tax rate will not be achieved;
political conditions and developments; the possible effect on CIBC's business
of international conflicts and the war on terror; natural disasters, public
health emergencies, disruptions to public infrastructure and other
catastrophic events; reliance on third parties to provide components of CIBC's
business infrastructure; the accuracy and completeness of information provided
to CIBC by its clients and counterparties; the failure of third parties to
comply with their obligations to CIBC and its affiliates; intensifying
competition from established competitors and new entrants in the financial
services industry; technological change; global capital market activity;
interest rate and currency value fluctuations; general economic conditions
worldwide, as well as in Canada, the U.S. and other countries where CIBC has
operations; changes in market rates and prices which may adversely affect the
value of financial products; CIBC's success in developing and introducing new
products and services, expanding existing distribution channels, developing
new distribution channels and realizing increased revenue from these channels;
changes in client spending and saving habits; and CIBC's ability to anticipate
and manage the risks associated with these factors. This list is not
exhaustive of the factors that may affect any of CIBC's forward-looking
statements. These and other factors should be considered carefully and readers
should not place undue reliance on CIBC's forward-looking statements. CIBC
does not undertake to update any forward-looking statement that is contained
in this press release or in other communications except as required by law.




For further information:

For further information: Rob McLeod, (416) 980-3714 for media inquiries:
John Ferren, (416) 980-2088 for investor inquiries


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