DBRS Comments on Canadian Western Bank Warrant Proposal

DBRS has reviewed Canadian Western Bank’s (the Bank’s) proposal to redeem the outstanding common share purchase warrants and concluded there are no rating implications at this time.

Using publicly available data as at April 30, 2011, the end of the Bank’s second quarter, DBRS estimates the worst-case scenario (assuming all warrants are repurchased and no additional equity is issued) for the tangible common equity (TCE) ratio and the Tier 1 ratio to be about 84 basis points, reducing the TCE and Tier 1 ratios from 8.6% and 11.6%, respectively, to 7.8% and 10.7%, respectively.

The largest warrant holder has entered into a conditional subscription agreement where the Bank may issue it up to 2.3 million shares. In addition, some warrants may have been repurchased or exercised prior to the deal. As a result and assuming the deal is completed, the actual reduction in capital ratios will likely be more moderate.

Note:
The applicable methodologies are the Global Methodology for Rating Banks and Banking Organisations (January 14, 2010), Rating Bank Preferred Shares and Equivalent Hybrids (June 29, 2009) and Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments (February 11, 2009), which can be found on our website under Methodologies.