Sterling Financial, the bank holding company of Sterling Savings Bank and Golf Savings Bank, has entered into an agreement for an investment from Warburg Pincus Private Equity, that supports Sterling’s recapitalization and recovery plan.

Under the terms of the agreement and subject to the approval of the transactions by the US Treasury and the other conditions, Warburg Pincus would invest $139m in Sterling.

If the recapitalization transactions contemplated by the agreement are completed, Warburg Pincus would own common stock, Series B participating voting preferred stock and warrants representing approximately 20.5% 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, (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 $278m on a combined basis, and would hold an ownership interest of approximately 40% 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 Coulter would join the Sterling board of directors.

Mr Coulter’s appointment would be in addition to the pending appointments of Les Biller, the former vice chairman and COO of Wells Fargo, as chairman of the board and THL managing director Scott Jaeckel as a member of the board.

Greg Seibly, president and CEO of Sterling, said: “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.”