CIBC today announced it expects to further enhance its capital position by raising a minimum of $2.75 billion of newly issued common equity.

CIBC says it has received written commitments from a group of institutional investors, including Manulife Financial Corporation, Caisse de dépôt et placement du Québec, Cheung Kong (Holdings) Ltd. and OMERS Administration Corp., to invest, by way of a private placement, $1.5 billion in CIBC common shares.

CIBC World Markets Inc. and UBS Securities Canada Inc. acted as joint bookrunners in the private placement.

In addition, CIBC has entered into an agreement with a syndicate of underwriters led by CIBC World Markets Inc. as bookrunner and jointly led by UBS Securities Canada Inc. under which they have agreed to purchase $1.25 billion in CIBC common shares at a price of $67.05.

CIBC has granted the underwriters an over-allotment option to purchase up to an additional $187.5 million in common shares at the same offering price. Should the over-allotment option be exercised in full, the total gross proceeds of the public offering would be $1,437,500,000. The purchase price of the shares acquired by the private placement investors is $65.26. In addition, the private placement investors will receive a commitment fee equal to 4% of their individual commitments. Both the private placement and the public offering are anticipated to close on or about January 24, 2008.

CIBC’s Tier 1 capital ratio was 9.7% as of October 31, 2007. On the assumption that $2.75 billion of equity is raised through the share offering, and factoring in the impact of the write-downs and fair value adjustments noted below, CIBC estimates its Tier 1 ratio to be approximately 11.3% as of December 31, 2007, well in excess of its target of 8.5%.

“As we have said before, one of our priorities is to further strengthen CIBC’s capital base for contingent risk given the challenging credit market conditions and the potential impact on CIBC,” says Gerry McCaughey, president and CEO. “Today’s action provides our shareholders with greater certainty that CIBC’s capital levels will remain strong even in the event that additional write-downs related to the U.S. residential real estate market become necessary.”

DBRS is maintaining its ratings on CIBC on news that the bank is planning a large capital injection.

The rating agency says that the issuance of common equity by CIBC will strengthen the bank’s capital basis. “The capital injection provides more flexibility should further negative events occur,” it notes.

However, CIBC’s ratings also remain under review with negative implications, despite the equity capital injection, “as concentration risk of counterparty and overall risk management processes of the bank remain concerns,” DBRS notes.

“Factoring in the impact of write-downs and fair value adjustments of $2.4 billion pre-tax, related to exposure to the U.S. sub-prime real estate market, and the share offering, the Tier 1 ratio of CIBC is expected to be approximately 11.3% at December 31, 2007,” DBRS adds.