Private-equity giant the Carlyle Group has not invested $150 million into Butterfield Bank to "make a quick buck", according to one of its top executives.

Carlyle managing director and head of the Global Financial Services group, Olivier Sarkozy, told The Royal Gazette yesterday that he saw a five to seven-year time horizon on the investment and expected the bank to bounce back from a traumatic period.

Butterfield announced a $550 million capital investment from a group of mainly overseas investors on Monday. Carlyle and the Canadian Imperial Bank of Commerce led the group, each investing $150 million in new Butterfield equity.

The investment allowed Butterfield to recapitalise and to rid itself of problematic investments tied to US mortgages that have cost it hundreds of millions of dollars in writedowns over the past two years.

The deal also gave both Carlyle and CIBC a 22.8 percent stake in the bank and two directors each on the board.

Mr. Sarkozy said he had been working on the deal "for two-and-a-half months on a 24-7 basis".

When it was put to Mr. Sarkozy that the two major investors could work together to effectively run the bank, he said that would not be the case.

"On paper, you could come to that conclusion," said Mr. Sarkozy, who is the half-brother of French President Nicolas Sarkozy.

"But if the appetite had existed for that approach, then we could have bought the bank.

"We believe Butterfield has a competitive advantage as a locally owned and managed institution. We don't think of ourselves as being managers of these entities. We are pretty good financially, but we don't have the expertise to run these companies."

Carlyle has bought into other financial institutions during the financial crisis, taking 24 percent stake in both Boston Private Financial Holdings Inc. and BankUnited Financial Corp.

Carlyle Group pools capital from private investors and uses it to make strategic investments in companies all over the world.

Private-equity firms have gained a reputation for buying large stakes in companies, forcing changes to boost their market value and then selling them off — sometimes piece by piece — within two to five years.

Mr. Sarkozy said Carlyle had no such plans in mind and had not seen any particular segments in the Butterfield group, which operates in nine jurisdictions, that he would not be comfortable with as part of Carlyle's longer term investment.

Carlyle had seen Butterfield as "a company with a tremendous history, reputation and brand" and was particularly attracted by its low loan-to-deposit ratio of around 50 percent.

He saw Carlyle's investment as having a five- to seven-year time horizon, with the possibility of additional investment over the coming years. He thought the bank's rehabilitation to restore its former market strength could take three to five years.

This was very different from many private-equity deals, Mr. Sarkozy said, adding: "We delever things, we don't lever them."

Strengthened by its new capital, Butterfield is in the process of selling off more than 90 percent of the troubled assets that caused huge investment losses, which will result in a $150 million to $175 million loss in the first quarter.

The remainder of those securities, backed by various assets, including US mortgages, will make up around two percent of the balance sheet when the sell-off is complete, Mr. Sarkozy estimated.

Dealing with those legacy issues will leave Butterfield with a "fortress balance sheet" and able to grow its core banking activities, Mr. Sarkozy said.

Butterfield was unusual in that there was significant overlap between its customer base and its shareholders, Mr. Sarkozy said. The rights offering which will next month give Butterfield shareholders the option to buy back $130 million in equity from the new investors at $1.21 per share — the same price the institutions paid for it — would give them an opportunity to participate in a bright future for the bank, he said.

Mr. Sarkozy, along with the two directors Carlyle will put forward to sit on the Butterfield board, James Burr and Wolfgang Schoellkopf, met with leading directors and officers of Butterfield yesterday. They also had meetings with the Finance Ministry and Bermuda Monetary Authority officials.