Investors looking to buy preference shares in Butterfield Bank can expect to receive a minimum dividend of eight percent it was announced by the bank yesterday.

Alan Thompson, president and CEO of Butterfield Bank, told prospective shareholders the rate of return on their dividends would not be less than eight percent and could be more at the Preference Share Offering Information Session held at the Bermuda Underwater Exploration Institute.

The bank will be holding a series of sessions over the next week to 10 days to market the deal to investors in Bermuda before seeking investment from the US and elsewhere overseas, with US$200 million worth of shares available at $1,000 per share and a minimum investment of $10,000 per buyer.

The dividend will be paid on a quarterly basis on March 15, June 15, September 15 and December 15 every year for the next 10 years, starting on September 15, 2009.

In March, Government stepped in to back Butterfield Bank with a $200 million guarantee to help it out in the event of a severe economic downturn, with the bank agreeing to issue $200 million of non-convertible preference shares, with both the principal and the dividends being guaranteed for a 10-year period by Government, which will in turn receive a guarantee fee of one percent per annum, under the terms of the agreement.

The bank's shareholders then gave the go-ahead for the deal at a special general meeting held the following month despite concerns over the dilutive effect the Government-guaranteed preference stock would have on their common shares.

At the meeting, Mr. Thompson gave an overview of the process and offering as well as some background on Butterfield Bank before turning over to the floor for questions.

He said the bank was keen to get as many investors in Bermuda involved in the preference share offering before turning to investment from abroad, in which case it had to be in compliance with US security laws.

Potential new investors were handed out 300-page copies of the preliminary offering memorandum at the meeting, which presented a summary of the offering and the risks associated with it, including details on the bank, Government and the shares, as well as the terms of the guarantee provided on them.

Mr. Thompson said the capital raised from the deal would be used as a "buffer" to withstand a more "pronounced or prolonged" economic downturn and to improve the bank's liquidity position, at the same time as offering an attractive return to investors. "The rate will not be less than eight percent and it could possibly be greater than that," he said.

Mr. Thompson fielded a number of questions from concerned parties at the event including everything from levels of investment to the current state of the bank's finances and the impact of write-downs on its investment portfolio.

He pointed out that the maximum investment was the full $200 million, while he said the bank expected to set a $10,000 minimum limit for investors, and the share value was in US dollars, with those paying in Bermudian dollars being subject to a foreign currency transaction payment.

In addition, Mr. Thompson said the bank planned to list its shares in both in a primary listing in Bermuda and in a secondary market in Luxembourg.

The shares will be fully and unconditionally guaranteed by Government as guarantor in terms of payment of dividends (equal to the amount of unpaid dividends) and liquidation preference for up to 10 years, with Government committing to buy any shares not sold in the offering up to the total of $200 million by June 30, 2009.

They would not be convertible into or exchangable for, or carry rights or options to buy any common shares or other class of security of the bank or other entity, and in the event of liquidation prior to the end of the 10-year term, Government would have to purchase all of the shares at an value equal to the liquidation preference per share of $1,000 and the amount of unpaid dividends per share for that dividend period.

The bank can redeem the preference shares 10 days before the end of the guarantee at a price equal to the make-whole value or redemption price, subject to the Bermuda Monetary Authority's approval, while holders of issued and outstanding shares will be required to sell to the Government at an amount equal to the sum of the liquidation preference per share and the unpaid dividends per share at the guarantee end date.

Meanwhile net proceeds will be used for the bank's general corporate purposes and working capital.

The shares are available to purchase through Butterfield Bank, Bermuda Commercial Bank, Capital G, First Bermuda Group, LOM and Barrington Investments Ltd.