Butterfield Bank is to redeem all of its 8 per cent Government Guarantees Preference Shares.

The shares were issued in June 2009, giving the bank a $200 million injection as it recapitalised following the impact of the global financial crisis the previous year.

The shares carry a guarantee of dividend payments extending to June 2019. This guarantee is backed by the Bermuda Government and the future value of those dividend payments will be honoured, even as the shares are redeemed 2½ years ahead of that date.

Following the bank’s successful initial public offering on the New York Stock Exchange in September, its directors decided it was the appropriate time to redeem the preference shares, given the bank’s strong capital position and its ability “to generate excess capital from operations”.

Michael Collins, Butterfield’s chief executive officer, said: “Our successful US public offering was an important milestone for Butterfield, marking the bank’s full recovery from the impact of the global financial crisis and the beginning of a new chapter of growth.

“The redemption of preference shares will allow our common shareholders to participate more fully in the bank’s success going forward.”

The redemption equates to 31 cents per common share based on the 53,248,307 common shares outstanding at the end of September.

Mr Collins added: “I would like to thank the preference shareholders who invested in Butterfield at a time when we needed their support.

“We are pleased to be in a position to retire the entire preference share issue with a payment of $215.8 million, comprising principal and current dividends of $186.5 million and a make-whole premium of $29.3 million, representing the present value of future dividends that preference shareholders would have received through 22 June 2019.”

Mr Collins thanked the government for supporting the preference share offering in 2009 with its unconditional guarantee of dividends and principal.

The mandatory redemption of the 182,863 outstanding shares will take effect on December 15, and will result in the discontinuance of annual payments of $16.4 million in preference share dividends and government guarantee fees.

Preference shareholders of record on December 1 will receive a “make-whole” redemption payment of $1,180 per preference share on December 15. The preference shares will be delisted from the Bermuda Stock Exchange and the Luxembourg Stock Exchange.

Formal notification and complete information regarding the mandatory redemption of the preference shares will be mailed to preference shareholders not later than November 14.

Disclosure: the writer owns shares in Butterfield Bank