CIBC Capital Trust and CIBC had entered into an agreement with a group of underwriters for an issue of two series of Tier 1 notes, the bank said Thursday.

CIBC Capital Trust had agreed to sell $1.3 billion of CIBC Tier 1 Notes-Series A, due June 30, 2108 paying interest of 9.976%. It also agreed to sell $300 million worth of Series B notes, due June 30, 2108, paying 10.25%.

“The net proceeds of this offering will be used for general purposes of CIBC,” the bank said.

The notes are expected to qualify as Tier 1 capital of CIBC for regulatory purposes.

CIBC reported a Tier 1 capital ratio at Jan. 31 of 9.8%. Giving effect to the $325 million Series 35 preferred share issue that closed on Feb. 4, the $200 million Series 37 preferred share issue scheduled to close on March 6, and the $1.6 billion Tier 1 Notes issue announced Thursday, CIBC’s pro-forma Tier 1 capital ratio at Jan. 31, 2009, would be approximately 11.5%.

Tier 1 is a key level of capital required by bank regulators. Currently, the Tier 1 requirement is seven per cent.

From the date of issue to, but excluding June 30, 2019, interest on the Tier 1 – Series A Notes is payable semi-annually at a rate of 9.976% per year. Starting on June 30, 2019, and on every fifth anniversary thereafter until June 30, 2104, interest on the Tier 1 – Series A Notes will reset.

From the date of issue to, but excluding June 30, 2039, interest on the Tier 1 – Series B Notes is payable semi-annually at a rate of 10.25% per year. Starting on June 30, 2039, and on every fifth anniversary thereafter until June 30, 2104, interest on the Tier 1 – Series B Notes will reset.

On or after June 30, 2014, the Trust may, at its option and subject to certain conditions, redeem the Tier 1 – Series A Notes or the Tier 1 – Series B Notes, in each case, in whole or in part.

In certain circumstances, the Tier 1 Notes may be automatically exchanged for, or interest may be paid by, the issuance of non-cumulative Class A Preferred Shares of CIBC.

The expected closing date is March 13.