Commerce Split Corp.

Commerce Split Corp.

October 21, 2008 11:13 ET

Commerce Split Corp.: Portfolio Update

TORONTO, ONTARIO--(Marketwire - Oct. 21, 2008) - Commerce Split Corp. ("Commerce Split") was created to provide exposure to the common shares of Canadian Imperial Bank of Commerce (CIBC) through two classes of securities, the Priority Equity Shares and the Class A Shares (a "Unit"). As stated in the prospectus, holders of the Priority Equity Shares are to be provided with a stable yield and downside protection on the return of their initial investment. Class A Shares are to be provided with leveraged exposure to CIBC common shares including both increases and decreases in the value of the common shares of the Bank and the benefit of any increases in the dividends paid by the Bank on its common shares.

Since the inception of Commerce Split on February 16, 2007 the price of CIBC has declined 40% to $61.00 from $102.15 as of October 20, 2008. This sharp decline in CIBC has resulted in the Company's net asset value being reduced significantly and as mentioned in previous updates, has required the Company to implement the Priority Equity Portfolio 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. Currently the portfolio has approximately $4.50 in cash and notional value (value at maturity) of permitted repayment securities per unit. This leaves the Priority Equity Shareholder exposed to $5.50 per share ($10.00 par value - $4.50 in cash and permitted repayment securities) in CIBC holdings. As at the close on October 20, 2008, the Company's investment portfolio had approximately $9.15 in CIBC exposure per Unit ($7.04 per unit in CIBC shares and the equivalent of $2.11 in exposure through long call options). The Company has limited call options written at higher levels providing the fund with income while still allowing for upside potential. The Company's total net asset value is approximately $10.75 per unit.

The Company's portfolio is continually rebalanced and adjusted 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 and provided that the Company remains in compliance with the Priority Equity Protection Plan.

Contact Information

  • Commerce Split Corp.
    Investor Relations
    (416) 304-4443, Toll Free: 1-877-4-Quadra (1-877-478-2372)