Carlyle poised for 2.5x return in sale of Bank of Butterfield shares

Carlyle Group stands to make as much as 2.5x its investment in Bank of Butterfield, a publicly traded Bermudan bank that floated a public offering on the New York Stock Exchange last year.

Carlyle unloaded roughly 3 million shares in the bank’s September 2016 public offering on the Big Board, which yielded the firm $66 million. A second offering, priced last week, will likely yield another $240 million for Carlyle, SEC filings show.

Carlyle’s $1.1 billion 2008 financial-services fund acquired a stake in Bank of Butterfield in 2010 when it led an investor group with Canadian Imperial Bank of Commerce that invested $500 million in the troubled bank, SEC filings say.

Carlyle’s stake in Bank of Butterfield, which came shortly after the bank sustained significant recession-related losses from its holdings in U.S. mortgage-backed securities, amounted to $150 million of common and convertible shares.

The business grew substantially under Carlyle, with customer deposits increasing to a little more than $10 billion from around $7.1 billion between 2011 and 2016, according to a securities filing.

Through Carlyle’s sales of the bank’s shares via public offerings, along with annual cash dividends and a $95 million recap in 2013, the firm likely yielded roughly 2.5x from the investment, according to SEC filings.

Randy Whitestone, a spokesman for Carlyle, declined comment.

Carlyle is expected to launch its third financial-services fund soon with a likely target of $1.5 billion, Buyouts reported earlier this year. The fund is led by John Redett and Brian Schreiber, who took over leadership of the group after Olivier Sarkozy left last year.

Carlyle’s second financial-services fund, which closed on $1 billion in 2014, was netting a 3 percent IRR and 1.1x multiple as of Dec. 31, the firm’s most recent earnings report says.

The firm’s first financial-services fund, which includes its Bank of Butterfield investment, was netting a 12.4 percent internal rate of return and 1.5x multiple as of June 30, California Public Employees’ Retirement System documents show.

Action Item: More about Carlyle Group: www.carlyle.com

David Rubenstein, co-founder and co-CEO of Carlyle Group, speaks at the Milken Institute Global Conference in Beverly Hills, California, on May 2, 2016. REUTERS/Lucy Nicholson