Sterling Financial Corp. of Spokane has found a way to raise $730 million in fresh capital, including an expansion of its investments from the private-equity firms Warburg Pincus LLC and Thomas H. Lee Partners LP.
The $9.7 billion-asset company, which has acknowledged doubts about its viability, has lost nearly $1 billion in the past 18 months and needed to raise $725 million by Sept. 1 to comply with a regulatory order. Sterling said Friday that it expects the transaction to close "on or about Aug. 26."
Greg Seibly, Sterling's chief executive, said in a press release that this represents "a major milestone in our recovery plan, and one that will substantially strengthen our capital ratios and provide a solid base for rebuilding long-term franchise value."
Industry observers said Sterling's success could be a harbinger of confidence for others.
"This was a long time coming and is likely a sigh of relief for the regulators," said Stephen Klein, an attorney with Graham & Dunn PC in Seattle. "It is a real positive for the Northwest, too. It is hopefully a sign that others can be successful in raising capital."
Warburg Pincus and Thomas H. Lee increased the amount they will invest in Sterling to a combined $342 million for a stake of 45%. The firms agreed last spring to invest a combined $278 million for a nearly 40% stake. Sterling secured agreements with about 30 investors for a private placement of about 155.3 million shares of common stock and 3.9 million shares of preferred stock, for proceeds of about $388 million.
The Treasury Department, which invested $303 million in Sterling through the Troubled Asset Relief Program in 2008, previously agreed to convert its preferred stock to common stock. After the transactions are completed Les Biller, former vice chairman and chief operating officer of Wells Fargo & Co., will be Sterling's chairman.