The U.S. Treasury will accept a steep markdown of its investment in Sterling Financial Corp. as part of a recapitalization plan, the Spokane company announced today.
The markdown was a condition imposed by Thomas H. Lee Partners, which has committed $134.7 million to Sterling's recapitalization.
Treasury in November 2008 invested $303 million from the Troubled Asset Relief Program in Sterling.
According to the terms of the agreement with Sterling and Lee, Treasury will get $75.8 million worth of common shares as payback, plus 6.4 million warrants to purchase shares at 20 cents apiece.
The warrants will be good for 10 years.
Sterling must raise a total $720 million in new capital to offset losses on its real estate and construction loans.