Sterling Financial Corp. (STSA) Announces Investment from Warburg Pincus
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Sterling Financial Corporation (Nasdaq: STSA) today announced an agreement for an investment from Warburg Pincus Private Equity X, L.P. that supports Sterling’s recapitalization and recovery plan.
Under the terms of the agreement and subject to the approval of the transactions by the U.S. Treasury and the other conditions described below, Warburg Pincus would invest $139 million in Sterling. If the recapitalization transactions contemplated by the agreement are completed, Warburg Pincus would own common stock, Series B participating voting preferred stock (the “Series B stock”) and warrants representing approximately 20.5 percent of Sterling, calculated in accordance with Federal Reserve guidelines on an as-converted basis and after giving effect to the exercise of these warrants.
As part of the Warburg Pincus investment, Thomas H. Lee Partners, L.P. (“THL”) has agreed to adjust the size of its previously announced proposed investment to an amount equal to the Warburg Pincus investment. The Warburg Pincus investment will be made on substantially the same terms as THL’s investment. Upon the closing of the recapitalization transactions, the two firms would invest a total of $278 million on a combined basis, and would hold an ownership interest of approximately 40 percent of Sterling calculated on the basis described above.
As part of the Warburg Pincus investment and subject to the closing of the recapitalization transactions and required regulatory approvals, Warburg Pincus Managing Director David A. Coulter would join the Sterling board of directors. Coulter is co-head of Warburg Pincus Financial Services investment activities and brings to Sterling’s board over 30 years of banking industry experience. Coulter is the former Chairman and CEO of BankAmerica and former Vice Chairman of JP Morgan Chase. Coulter’s appointment would be in addition to the previously announced pending appointments of Les Biller, the former Vice Chairman and Chief Operating Officer of Wells Fargo, as chairman of the board and THL Managing Director Scott Jaeckel as a member of the board.
Sterling President and Chief Executive Officer Greg Seibly said, “We are pleased to announce Warburg Pincus as an investor in Sterling. Warburg Pincus is a highly successful bank sector investor that has long-standing and deep knowledge of our company. We believe that the combination of Warburg and THL represent key components in our efforts to recapitalize the company.”
David Coulter said, “We are looking forward to partnering with Greg Seibly and Les Biller in providing governance input and support for Sterling as the company continues to build on its strong regional banking franchise in the Pacific Northwest.”
Each of the Warburg Pincus and THL investments and the U.S. Treasury exchange previously announced would be conditioned upon each other and on other closing conditions, including, among others, Sterling raising a total of at least $720 million of capital (inclusive of the Warburg Pincus and THL investments and the previously announced additional capital raise), receipt of regulatory approvals and third party consents, Sterling’s maintenance of asset levels and capital ratios, the absence of material changes in the characteristics of Sterling’s loan portfolio, no occurrence of an “ownership change” that would affect the preservation of certain of Sterling’s deferred tax assets, no occurrence of a material adverse effect and no adverse change in banking or bank holding company law, rule or regulation. Closing of the recapitalization transactions are not conditioned upon receipt of any shareholder approvals.
Under the terms of the agreement and subject to the approval of the transactions by the U.S. Treasury and the other conditions described below, Warburg Pincus would invest $139 million in Sterling. If the recapitalization transactions contemplated by the agreement are completed, Warburg Pincus would own common stock, Series B participating voting preferred stock (the “Series B stock”) and warrants representing approximately 20.5 percent of Sterling, calculated in accordance with Federal Reserve guidelines on an as-converted basis and after giving effect to the exercise of these warrants.
As part of the Warburg Pincus investment, Thomas H. Lee Partners, L.P. (“THL”) has agreed to adjust the size of its previously announced proposed investment to an amount equal to the Warburg Pincus investment. The Warburg Pincus investment will be made on substantially the same terms as THL’s investment. Upon the closing of the recapitalization transactions, the two firms would invest a total of $278 million on a combined basis, and would hold an ownership interest of approximately 40 percent of Sterling calculated on the basis described above.
As part of the Warburg Pincus investment and subject to the closing of the recapitalization transactions and required regulatory approvals, Warburg Pincus Managing Director David A. Coulter would join the Sterling board of directors. Coulter is co-head of Warburg Pincus Financial Services investment activities and brings to Sterling’s board over 30 years of banking industry experience. Coulter is the former Chairman and CEO of BankAmerica and former Vice Chairman of JP Morgan Chase. Coulter’s appointment would be in addition to the previously announced pending appointments of Les Biller, the former Vice Chairman and Chief Operating Officer of Wells Fargo, as chairman of the board and THL Managing Director Scott Jaeckel as a member of the board.
Sterling President and Chief Executive Officer Greg Seibly said, “We are pleased to announce Warburg Pincus as an investor in Sterling. Warburg Pincus is a highly successful bank sector investor that has long-standing and deep knowledge of our company. We believe that the combination of Warburg and THL represent key components in our efforts to recapitalize the company.”
David Coulter said, “We are looking forward to partnering with Greg Seibly and Les Biller in providing governance input and support for Sterling as the company continues to build on its strong regional banking franchise in the Pacific Northwest.”
Each of the Warburg Pincus and THL investments and the U.S. Treasury exchange previously announced would be conditioned upon each other and on other closing conditions, including, among others, Sterling raising a total of at least $720 million of capital (inclusive of the Warburg Pincus and THL investments and the previously announced additional capital raise), receipt of regulatory approvals and third party consents, Sterling’s maintenance of asset levels and capital ratios, the absence of material changes in the characteristics of Sterling’s loan portfolio, no occurrence of an “ownership change” that would affect the preservation of certain of Sterling’s deferred tax assets, no occurrence of a material adverse effect and no adverse change in banking or bank holding company law, rule or regulation. Closing of the recapitalization transactions are not conditioned upon receipt of any shareholder approvals.
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