More details, bank not selling, see bold:
CIBC Shares Rise as its Investment in Global Crossing
Soars
Bloomberg News
March 16, 1999, 8:53 a.m. PT
CIBC Shares Rise as its Investment in Global Crossing Soars
Toronto, March 16 (Bloomberg) -- Canadian Imperial Bank of
Commerce shares rose as much as 6 percent on optimism the bank,
hurt recently by lower profits, will earn about US$4 billion from
its three-year-old investment in telecommunications firm Global
Crossing Ltd.
Shares of CIBC, Canada's largest bank by assets, rose C$1.40
(US$0.92) to C$39.65 in midday Toronto trading of 2.45 million
shares, making it the nation's second most actively traded stock.
Earlier, it rose to C$40.60.
CIBC owns 22.4 percent of Global Crossing, a rapidly growing
Hamilton, Bermuda-based company that provides long distance phone
services over undersea fiber-optic networks. CIBC bought its
stake in 1996 for US$0.53 a share. The shares, which trade on the
Nasdaq Stock Market, have gained 159 percent this year to more
than US$58 each, valuing CIBC's stake at about US$3.94 billion,
said Roy Palmer, a bank analyst at TD Securities Inc. The bank
can't realize gains from the investment until at least August
under contract restrictions.
''CIBC made an excellent investment that when realized
enables them to buy back stock, or to expand or build up
reserves,'' said Palmer. ''It's instrumental in driving the
stock.''
The investment gains come after trading losses at CIBC
Oppenheimer Corp., the bank's New York-based securities unit, and
lower revenue reduced fourth-quarter earnings to C$0.01 a share.
The bank also had a string of bad investments last year, such as
those in Livent Inc., Philips Services Corp. and Toronto's
bankrupt retractable-roof stadium, Skydome.
CIBC stock dropped 59 percent to a low of C$24.40 in October
from its April high. The shares have since rallied 61 percent.
Palmer expects CIBC shares to rise to C$42.45 over the next 12
months.
Global Crossing was founded in March 1997 by Pacific Capital
Group Inc., a Beverly Hills, California-based merchant bank run
by Gary Winnick, a billionaire financier who once worked with
Michael Milken at Drexel Burnham Lambert's high yield, or junk,
bond group.
Global Crossing rose 1 7/8 to 58 7/16 in midday trading.
CIBC has five of Global Crossing's 18 board seats. Four of
the five CIBC seats are held by CIBC Oppenheimer executives, two
of whom previously worked at Drexel Burnham.
CIBC is not just a shareholder. It's also lent the company
money through its corporate bank and underwritten stock through
its investment bank.
Last month, AT&T Corp.'s Robert Annunziata joined Global
Crossing as its chief executive.
--Caroline Van Hasselt, through the New York newsroom (212) 318- |
