CIBC (TSX:CM) has acquired a minority interest in Bermuda-based The Bank of N.T. Butterfield & Son Limited, the bank announced Tuesday.

Under terms of the transaction, CIBC has invested US$150 million as part of a US$550 million recapitalization of Butterfield.

The Carlyle Group and several other institutional investors have invested the remaining US$400 million to complete the recapitalization.

Butterfield’s public shareholders will have the right to participate in the recapitalization by subscribing for additional common shares under a US$130 million rights offering, which could reduce the size of CIBC’s investment by up to US$25 million. In addition, CIBC has provided Butterfield with a commitment letter for a senior secured credit facility for up to US$500 million.

As a result of this investment, CIBC owns 22.5% of Butterfield’s equity in the form of common shares and convertible voting preference shares, and will nominate two of 12 directors on Butterfield’s board of directors. If at least US$25 million of additional common shares are issued under Butterfield’s rights offering, CIBC’s pro forma ownership will be reduced to 18.8% of Butterfield.

“This transaction fits well within our ongoing growth strategy for CIBC,” says Gerald McCaughey, CIBC president and CEO.

“Butterfield has strong market positions in Bermuda and the Cayman Islands as well as operations in seven other jurisdictions,” McCaughey adds. “As a result of the recapitalization, we and our partner investors believe that Butterfield will continue to be a leading financial institution for its clients and will provide continued value for its shareholders.”

CIBC has also invested US$26 million indirectly in Butterfield through a private equity fund sponsored by The Carlyle Group. CIBC previously committed US$150 million to the Carlyle fund to invest in financial services transactions.

Butterfield is the largest independent bank in Bermuda with assets of US$9.6 billion.

IE