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CIBC has reached a deal with a fund led by Cerberus Capital Management that the bank says will significantly reduce its exposure to the American subprime mortgage market.

Under the arrangement, the Cerberus fund will invest just over US$1 billion in CIBC’s U.S. residential real estate portfolio, which includes residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs). The portfolio was valued at $1.186 billion as of June 30, 2008.

The Cerberus fund will acquire $1.05 billion of amortizing senior notes, which have a capped return, payable in cash. CIBC will retain 100% of the potential upside on the portfolio following repayment of the notes.

“This transaction sets a floor under CIBC’s exposure to the U.S. residential mortgage market,” says Gerry McCaughey, CIBC’s president and chief executive. “At the same time, retaining ownership of these securities, combined with the option regarding the timing of any redemption of this note, provides us with important flexibility to benefit from a future recovery in the cash flows of these securities.”

The transaction is expected to add 13 basis points to CIBC’s Tier 1 capital ratio, which was 10.1% at the end of July, “well above CIBC’s target of 8.5%,” the bank says.

Painting a picture of a worst-case scenario, where the value of all of the portfolio’s securities fall to zero, and there are no recoveries from guarantors, the bank says the impact would be limited to a loss of 0.45% on its Tier 1 capital ratio.

“Our capital position is strong and our actions to reduce risk in our structured credit portfolio further that strength,” says McCaughey. “In addition, retaining the right to future recoveries provides the potential for further enhancement to CIBC’s performance.”

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Bimcor Loses Chief Investment Officer

Peter Jarvis is no longer chief investment officer of Montreal’s Bimcor, the investment arm of BCE’s pension fund.

While a Bimcor representative confirmed Jarvis’s departure earlier this week, neither the pension fund nor BCE will comment on the move or who might replace him.

In business since 1983, Bimcor currently has $13 billion of assets under management.

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Marcoux Joining Fortis

Vincent Marcoux will join Fortis Investment Management Canada Ltd. (Fortis Investments) as vice-president, institutional sales and client services, Quebec and Eastern Canada.

In this role, he will open the firm’s Montreal office and will be responsible for the client base in Quebec, as well as for business development in the Ottawa region, Quebec and Atlantic Canada.

Marcoux has more than 20 years experience in pension plan financing and investments. Prior to joining Fortis Investments, he worked for a European bank and key institutions such as SNC-Lavalin Group and the Montreal School Board Pension Plan.

Fortis Investments operates in more than 30 countries with 2,000 employees and manages $300 billion in assets for a broad range of institutional, retail and private clients.

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Workers Want to Go Back to School

An overwhelming majority of Canadians say they would go back to school and hit the books this fall if they could, according to a survey.

A remarkable 87% gave a thumbs-up to the idea of returning to the classroom this fall, if only they could.

Among the positive responses, 58% said going back to school would “help me achieve my career goals.” Another 29% who said yes to school also admitted that they were not learning anything in their current job.

The remaining 12% of respondents—or about one in 10—said no to a return to school, saying they are satisfied with their life and work.