The bank was found liable for losses suffered by a US-based hedge fund
Canadian Imperial Bank of Commerce said that it will be appealing a New York State court decision that has found it liable for losses suffered by US-based hedge fund Cerberus Capital Management LP.
“CIBC strongly disagrees with the legal and factual basis for the court’s decision,” the bank said on January 4.
Justice Joel Cohen of a New York state court in Manhattan has ordered CIBC to pay US$491 million plus prejudgment interest. CIBC said that it is expecting to pay US$848 million, which could force the bank to record a pretax provision of $1.16 billion in its fiscal Q1 earnings.
Cerberus said that CIBC defaulted on payments on a debt instrument that the bank issued in 2008, as well as on another related transaction in 2011. Cerberus initially sought US$1.1 billion in damages in 2015.
The decision followed a December 1 non-jury trial that found CIBC liable for breach of contract. Cohen rejected CIBC’s claims that Cerberus acted fraudulently.
“The evidence did not ... show that CIBC was a hapless rube led astray,” Cohen said in December.
Analysts said that CIBC’s common equity tier (CET1) ratio could fall from 11.7% to 11.4% as a result of this repayment.
