Butterfield Bank's new chief executive officer said last night that yesterday's dramatic announcement of a capital injection of more than half a billion dollars will allow the bank to rid itself of the uncertainty that has plagued it over the past 18 months.

Bradford Kopp's promotion to the top job in the bank — replacing the retiring Alan Thompson — was announced yesterday, as Butterfield announced a $550 million investment from a group of mainly foreign investors.

In an interview with The Royal Gazette last night, Mr. Kopp said the new money was wired to the bank yesterday and will enable it to sell off the troubled investments that have forced Butterfield to make hundreds of millions of dollars in writedowns.

He added that there had been an additional $91 million of writedowns in the fourth-quarter, but that the bank could now put those problems behind it.

"We are going to be de-risking the balance sheet and selling off those risky assets and take a $150 million loss in the first quarter to do it," Mr. Kopp said.

"That will clear up the uncertainty — there is nothing markets like less than uncertainty."

The new investors, led by the Carlyle Group and the Canadian Imperial Bank of Commerce (CIBC), will receive a mix of preference and common shares. Common shareholders did not get the chance to vote on the deal, after the bank was given an exemption by the Bermuda Stock Exchange.

Mr. Kopp explained that this was seen as in the best interests of shareholders.

"We did not want to make the announcement before we had the capital — we wanted the capital in the door," Mr. Kopp said. "We will have a rights offering in April for our common shareholders who will have the right to buy shares at $1.21 — the same price as the new investors."

Trading in the bank's shares was suspended by the BSX yesterday, after the share price closed at $2.85 on Monday.

Shareholders, who have seen their investments plummet in value from a share price of $21 on August 15, 2007, following a three-for-one stock split, are likely to feel still more aggrieved after what little is left of the value of their shares will be effectively more than halved by yesterday's deal.

The bank also announced yesterday that dividends would be suspended until Butterfield returned to "sustainable profitability", effectively rubbing salt into shareholders' wounds.

Chairman Robert Mulderig said: "We looked at every solution we could come up with and we decided that this would be the best solution for the shareholders. We know this will be terribly disappointing for them. We felt it was essential to have the capital at the time we announced the plans." A delay to accommodate a shareholder vote would only have created more uncertainty, he added.

Mr. Mulderig said the capital would allow the bank to get "the potential effects of our problematic assets behind us and to continue to comply with increasing regulatory requirements for common equity capital".

Mr. Kopp added: "We know that many of our shareholders are reliant on their dividends and so we are disappointed to have to suspend dividend payments. But when you are short on capital, the place you start is the dividends.

"We are continuing to pay out an annual rate of $16 million on our preference shares. And we believe we can resurrect our dividend on common shares within a few years. This is a company that should be paying an appropriate payout ratio of 30 to 40 percent — and we hope to do that when we get back to strong profitability within a few years."

Talks had been going on with the new investors for "a few months", Mr. Kopp said. The bank had sought answers to its capital needs, particularly in New York, but also farther afield.

Carlyle Group and CIBC have each invested $150 million, while other investors include the Bermuda Government Pensions Fund, the Wellcome Trust, Julian Robertson and Goshen Investments, LLC. Their combined investment represents 82.5 percent of the ownership of Butterfield.

If the $130 million rights offering is fully subscribed by common shareholders next month, then shareholders — excluding the new investors — would own an approximately 37 percent stake.

Butterfield said that neither Carlyle, nor CIBC, will own more than 22.8 percent of the bank. Any investor whose stake in a Bermuda bank exceeds 9.9 percent is required to meet with regulators and the BMA had been kept informed "every step of the way", Mr. Kopp said.

The new CEO added that there were no plans to cut Butterfield's 760-strong workforce in Bermuda. "Our new investors did not come in to shrink the company — they want to see growth," Mr. Kopp said. "We are the third largest employer in Bermuda and want to build this company and create more employment — and we believe we can."

He added that he was proud of the group's employees and their reputation for good service was a hallmark of the franchise.

Problems with more than one tourism-related loan caused the bank to increase its credit provision to $94.3 million from $1.9 million in 2008, a charge that contributed to the Bermuda segment's loss of more than $208 million.

Butterfield has also seen its deposits drop by around $1.1 billion over the past year — from $9.8 billion to $8.7 billion — but Mr. Kopp did not see that as evidence of a loss of a significant number of customers.

"Since March, we have seen some deposit losses from large hedge funds," Mr. Kopp said. "I believe our core customers are still with us. We see ourselves as a community bank. That is what we want to focus on."