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Barrick intent on suing CIBC over ABCP


April 18, 2008

Barrick Gold Corp. wants to sue Canadian Imperial Bank of Commerce, alleging that the bank misled the gold miner about links between its ABCP and the imploding U.S. subprime mortgage market.

In a bid to retain its right to sue the bank, Barrick has joined the parade of companies challenging a provision in the $32-billion asset-backed commercial paper restructuring that protects the bank from lawsuits.

In a motion filed with a Toronto court, Barrick is seeking to have the releases dropped from the plan or the company's ABCP excluded from the proposal.

Barrick alleges that CIBC's securities arm "expressly confirmed to Barrick that its money markets investments did not have exposure to subprime assets" leading Barrick to hold on to the paper and even buy more just prior to the market for the paper freezing last August.

In fact, Barrick says, some of the paper purchased from CIBC did have "significant" subprime exposure, and will now be worth very little even if the restructuring succeeds.

"Barrick has good causes of action against CIBC and CWM [CIBC World Markets] that it should be free to pursue, notwithstanding the proposed plan," Barrick said in the motion.

Barrick, which has about $66-million in frozen ABCP, joins a number of companies that include Jean Coutu Group (PJC) Inc., Transat A.T. Inc. and Aéroports de Montréal that are fighting a so-called "legal release" clause in the restructuring that would make it impossible to sue banks who sold and structured the paper.

The committee of large investors that created the restructuring proposal argues that the legal release for all players in the market is a linchpin of the plan, and without it the proposal would collapse with massive losses for investors across the country.

CIBC spokesman Stephen Forbes did not respond to a request for comment.

In an affidavit, Barrick treasurer James Mavor said the company started making investments through CIBC World Markets in May, 2007.

In July, as concern grew in markets about subprime, Mr. Mavor said Barrick asked CIBC about exposure, and was told there was none. As a result, he said Barrick on July 26 bought $33-million more of paper.

Three weeks later, the market for ABCP froze as buyers disappeared on concern about subprime, and the investors committee and chairman Purdy Crawford stepped in to begin working on a restructuring.

Barrick also said it was misled by the investor committee, alleging it reneged on a deal that would enable Barrick to retain litigation rights.

"The committee and its advisers have consistently acted in good faith and in the best interests of noteholders," said committee spokesman David Weiner.


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