CIBC to pay US$770M to settle Cerberus lawsuit over note
BNN Bloomberg
Canadian Imperial Bank of Commerce agreed to pay Cerberus Capital Management LP US$770 million to settle a lawsuit with origins in the 2008 financial crisis.
The settlement amount is US$85 million less than CIBC had set aside in a pretax provision in its fiscal first quarter to cover damages and prejudgment interest after a court ruled against it in the matter. The agreement “eliminates the uncertainty, distraction and expense of continued litigation between the parties,” CIBC said Friday in a statement.
Cerberus’s lawsuit, filed in 2015, accused CIBC of defaulting on payments related to a limited-recourse note that the bank issued to Cerberus to reduce its exposure to the US residential real estate market. CIBC issued the note in 2008 and sold a residual interest in the specified payment streams to Cerberus in 2011.
Cerberus had claimed damages of US$1.07 billion in the case. CIBC will record the difference between its initial provision and the actual settlement amount in its fiscal second quarter.
