Butterfield Bank yesterday announced it had raised $550 million of new capital from mostly foreign investors and replaced Alan Thompson as chief executive officer.

The news came as the bank declared a net loss of $213.4 million for last year and suspended all dividend payments on common shares "until the Bank returns to a period of sustainable profitability".

Private equity giant Carlyle Group and the Canadian Imperial Bank of Commerce (CIBC) were the main investors, each ploughing $150 million into the bank in exchange for preferred and common shares, priced at $1.21 apiece.

Shareholders were not given the opportunity to vote on the massive transaction after Butterfield received an exemption from the Bermuda Stock Exchange.

A rights offering next month will give shareholders the chance to invest an additional $130 million in newly issued shares, also priced at $1.21.

Trading in Butterfield shares, which closed at $2.85 on Monday, was suspended on the Bermuda Stock Exchange yesterday and will resume today.

Other investors include the Bermuda Government Pension Funds, as well as the Wellcome Trust, Julian Robertson and Goshen Investments LLC.

Chairman Robert Mulderig said the exemption from a shareholder vote had allowed the bank to inject the capital immediately, rather than making the announcement and waiting for shareholder approval. This was seen as the best solution for shareholders, he added.

Replacing Mr. Thompson as CEO is Bradford Kopp, who joined Butterfield four months ago as chief financial officer, on the back of a 33-year career in commercial and investment banking.

"This is a day when we can put things behind us," Mr. Kopp said in an interview last night. "We now have more than $700 million in capital and we can build on our great franchise and our great market positions."

He added that the new capital would enable the bank to sell off the remainder of the hundreds of millions of dollars worth of investments backed by US mortgages that have cost the bank dearly over the past two years.

"We are going to be de-risking the balance sheet, selling the riskiest assets and we'll take a $150 million loss in the first quarter to do that," Mr. Kopp added.

Jobs at the bank were safe, the new CEO added, and he expected the huge investment would eventually enable the bank to expand.

Only last year, Butterfield raised $200 million in a preference share issue that was guaranteed by Government. The intention was to ensure the bank had a sufficient capital buffer to withstand "a severe economic downturn".

But with income squeezed by low interest rates, the lack of a strong recovery in the US housing market to boost the value of its troubled assets and problems with some major loans made to Bermuda tourism-related projects, the bank has seen the need for an additional capital raise just nine months later.

While Mr. Thompson, who is retiring from the bank, said last year that the troubled investments were improving, Mr. Mulderig said that he had not misled the public in saying that.

"I think the investments were well described in our financial reports," Mr. Mulderig said. "No-one here ever said the writedowns were finished.

"In fact these assets have been improving and continue to improve."

With Mr. Thompson's departure, the bank has replaced its top two managers, following the retirement of former chief financial officer Richard Ferrett last year.

Finance Minister Paula Cox welcomed yesterday's news last night and said: "The $550 million injection of new capital enables the Bank to de-risk its balance sheet and positions it for a reasonably quick return to profitability."

Jeremy Cox, CEO of financial regulator the Bermuda Monetary Authority (BMA), said the BMA had been in dialogue with the bank on the need to strengthen its balance sheet in light of the ongoing financial crisis.

"The subscription of $550 million in new shares will boost the capital position of the bank to a level well in excess of the Authority's minimum capital requirements," Mr. Cox said.

The bank's Bermuda segment fared worst of the operations in nine jurisdictions, posting a net loss of $208.4 million last year.

A major factor in the loss was a $94.3 million credit provision on "hospitality loans".

Mr. Kopp said it would be wrong to detail what these loans had financed, but said they related to more than one project.