Sterling announces private investment, other steps to meet federal requirements

A Boston private equity firm will invest $134.7 million in struggling Sterling Financial Corp. as part of the Spokane company’s ongoing efforts to raise enough money to meet requirements imposed by federal regulators.

As part of that recapitalization effort, Sterling also said it entered into an exchange deal with the U.S. Treasury that will convert about $303 million in preferred shares held by Treasury to common stock worth about $75 million, the company said in a news release.

The two deals were described as linked, with the Treasury deal depending on Sterling signing the deal that will raise the $134.7 million from Thomas H. Lee Partners, L.P.

Company executives have said in the past that it’s rare for Treasury to accept such a steep discount on its investments, made as part of the Troubled Asset Relief Program.

Hoovers describes Thomas H. Lee as a “friendly leveraged buy-out company” that prefers to work with distressed companies to improve shareholder value.