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CIBC originally tried to take FirstCaribbean public at a valuation of US$1.4-billion last year, but the new sale price could come in around the unit’s US$1.2-billion book value.

Fred Lum/Globe and Mail

Canadian Imperial Bank of Commerce is in negotiations to sell its Caribbean business to a Colombian billionaire, hoping to close the books on a difficult sale process that has taken two years.

Since failing to take Barbados-based CIBC FirstCaribbean International Bank public in 2018, CIBC has held talks with strategic and financial buyers and is now eyeing a deal with Jaime Gilinski Bacal, according to a source familiar with the discussions. The source is not being identified by The Globe and Mail because they were not authorized to speak publicly on the matter.

Born in Colombia and educated in the United States, Mr. Gilinski lives in London and is best known for his investments in banking and real estate. In the late 1990s, he and a group of investors bought Banco de Colombia from the government and made a large investment in Banco de Sabadell, Spain’s fourth-largest banking group.

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CIBC originally tried to take FirstCaribbean public at a valuation of US$1.4-billion last year, but the new sale price could come in around the unit’s US$1.2-billion book value. Banks tend to sell for between one and two times their book values.

It is also possible that Mr. Gilinski could buy a 70-per-cent to 75-per-cent stake, according to the source, which would decrease CIBC’s proceeds from the sale.

CIBC declined to comment on any sale discussions. “Our focus is on enhancing FirstCaribbean’s long-term growth prospects while creating value for the clients, shareholders and other stakeholders of both FirstCaribbean and CIBC,” the bank said in an e-mailed statement.

Mr. Gilinski could not be reached for comment.

Any sale would solve a major headache for CIBC. Five years ago, with the Caribbean economy struggling, more than half of CIBC’s total gross impaired loans came from FirstCarribbean. CIBC also took a $420-million writedown on the division that year.

For the next three years, CIBC focused on cleaning up FirstCaribbean’s balance sheet, largely by cutting costs, and by the end of 2017 it was looking to conduct an IPO of the unit on a U.S. exchange. Such a deal would have allowed the Canadian parent – which owns 92 per cent of FirstCaribbean – to start cashing out.

However, the offering was withdrawn in June, 2018, because it failed to garner enough investor support. One month later, the Barbados government missed an interest payment on external debt, putting CIBC at risk because it had US$506-million worth of exposure to Barbados through securities and loans.

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Yet, a deal with Mr. Gilinski isn’t guaranteed to succeed because CIBC may face opposition from local governments sensitive to potential job cuts under a new owner. Earlier this year, Scotiabank ran into trouble while attempting to sell its operations in nine Caribbean countries to Republic Financial Holdings Ltd., the Trinidad and Tobago-based parent company of Republic Bank, when deals to sell its assets in Antigua and Barbuda and Guyana faced resistance from local authorities.

“To date, [CIBC FirstCaribbean] has not consulted, advised or in any other way communicated with the government of Antigua and Barbuda concerning this matter,” said Sir Ronald Sanders, Antigua’s non-resident high commissioner to Canada. “One would have thought, after the experience of Bank of Nova Scotia’s attempts to sell its assets in the Caribbean without the knowledge of governments beforehand, that [CIBC FirstCaribbean] would not have made the same mistake.”

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