CIBC Settles Lawsuit for $770M
Canadian bank was sued by private equity company Cerberus over loans dating back to 2008
- Written by Banking Exchange staff
Canada’s CIBC has agreed to pay $770 million to private equity firm Cerberus to settle a lawsuit linked to a dispute over loans made in 2008.
The settlement — which is $85 million less than CIBC had set aside to cover the legal costs — relates to a 2008 agreement between the bank and a Cerberus-controlled entity, known as Securitized Asset Funding 2011-2 Ltd in the legal filing.
The transaction involved CIBC making payments in exchange for a loan worth more than $571 million to reduce its exposure to the then-troubled US residential real estate market at the height of the 2007-09 global financial crisis.
In 2015, Cerberus sued CIBC, alleging that the bank had not paid according to the original agreement, while CIBC countered that Cerberus had misinterpreted the terms.
A New York judge ruled in January that CIBC should pay $848 million in damages to the private equity firm, according to Reuters.
Last month, CIBC made it clear that it disagreed with the decision but has now decided to settle the case for around $80 million less than the judge ruled.
In a statement, CIBC said the money would be paid to a special purpose vehicle controlled by Cerberus Capital Management to “fully settle” the lawsuit. Both Cerberus and CIBC have agreed to the immediate dismissal of all claims linked to the case, the statement added.
“The settlement also eliminates the uncertainty, distraction and expense of continued litigation between the parties,” CIBC said.
Cerberus had not publicly commented on the settlement at the time of writing.
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