Barrick Gold Corp. and Canadian Imperial Bank of Commerce have settled their squabble over asset-backed commercial paper, removing another key roadblock in the $32-billion plan to restructure the ABCP market.
Barrick had been fighting in court for the right to sue CIBC for selling Barrick about $66-million of paper that is now almost worthless, but yesterday quietly dropped that effort in a one-sentence court filing. Barrick had also demanded full repayment.
Spokesman for both companies said a settlement had been reached, but said that terms were confidential. The deal was cut yesterdayafternoon after CIBC chief executive officer Gerry McCaughey met personally with senior Barrick executives, including chief financial officer Jamie Sokalsky.
"We have reached a satisfactory resolution and are pleased to do so," said Barrick spokesman Vince Borg.
The terms were "mutually agreeable," said CIBC spokesman Stephen Forbes, who declined to elaborate.
Sources said a similar deal is close between CIBC and Chicago-based Sun-Times Media Group Inc., which was in a position similar to Barrick's.
The settlements will be a relief to other ABCP investors because the court challenge had the potential to upset the entire restructuring plan, which has been nine months in the making. The market has been frozen since August of last year when investors fled ABCP amid concern about links to subprime mortgages.
Barrick wanted the judge overseeing the restructuring plan to strike down a part of the proposal that gave other players in the market, including banks such as CIBC, immunity from lawsuits.
But to do so, the judge would have had to risk the possibility of the deal falling apart. Banks that are backing the deal have insisted on the immunity as compensation for concessions they are making, and have threatened to pull their support if the protection from lawsuits is removed.
Even so, the scope of the immunity may be cut back to make it easier for the judge to pass the proposal, sources said. The Purdy Crawford-led investor committee that crafted the restructuring proposal is planning a weekend meeting to plot strategy before the judge rules on the fairness of the plan on Monday.
However, it's understood that while some banks, mainly Canadian ones, would be open to such a move to ease the terms of the immunity, it may face opposition from foreign lenders that are also party to the negotiations.
Hearings on the fairness of the deal, which are one of the final steps before investors can get their money back, are scheduled for Monday and Tuesday.
Barrick Gold Corp. (ABX)
Close: $41, up $1.81
CIBC (CM)
Close: $73.27, down 13¢
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