UPDATE 1-CIBC to issue C$1.6 bln of Tier 1 notes

* To offer C$1.6 bln of Tier 1 notes

* Offering expected to qualify as Tier 1 capital

* Shares fall 5 pct

March 5 (Reuters) - Canadian Imperial Bank of Commerce (CM.TO) said it will issue C$1.6 billion of Tier 1 notes through its CIBC Capital Trust unit in a move to bolster its capital ratios and balance sheet strength.

The bank said the offering includes an issue of C$1.3 billion of Tier 1 notes with a 9.976 percent yield until June 30, 2019, and C$300 million of Tier 1 notes with a 10.25 percent yield until June 30, 2039. Both notes are due June 30, 2108.

CIBC, which was hardest hit by the credit crisis among Canadian banks, said the proceeds will be used for general corporate purposes and are expected to qualify as Tier 1 capital. A bank's Tier 1 ratio is considered a key measure of its financial strength.

Canada's banks, which have been ranked as the world's soundest as the global financial crisis ravages their international peers, have nevertheless been shoring up their balance sheets by issuing preferred and common shares.

With this and other recent financing, the bank's pro-forma Tier 1 capital ratio at Jan. 31, 2009 would be about 11.5 percent, CIBC said.

The regulator of Canada's financial institutions requires domestic banks to have a Tier 1 capital ratio of at least 7 percent, but the average is around 9.5 percent.

On or after June 30, 2014, CIBC Capital Trust may redeem the notes in whole or in part. In certain circumstances, holders may convert Tier 1 notes to non-cumulative class A preferred shares of CIBC, the bank said.

CIBC expects the offering to close on March 13, 2009.

Shares of the bank were trading down C$1.53 at C$38.10 Thursday afternoon on the Toronto Stock Exchange.

($1=1.278 Canadian Dollar) (Reporting by Tenzin Pema in Bangalore; Editing by Anne Pallivathuckal)