Davis Polk & Wardwell LLP is advising Sterling Financial Corporation in connection with its recapitalization and recovery plan. The recapitalization includes an equity investment in Sterling Financial by Boston-based private equity firm Thomas H. Lee Partners, L.P. of approximately $134.7 million (representing a total investment of 19.9% on an as-converted basis, including warrants), an exchange transaction with the U.S. Treasury for its TARP preferred and an additional capital raise by Sterling Financial of at least $720 million (inclusive of the Thomas H. Lee investment).

Sterling Financial is headquartered in Spokane, Washington, and is the bank holding company for Sterling Savings Bank, a commercial bank, and Golf Savings Bank, a savings bank focused on single-family mortgage originations. Sterling offers banking products and services, mortgage lending, construction financing and investment products to individuals, small businesses, commercial organizations and corporations.

Thomas H. Lee and Sterling Financial have entered into a letter agreement for the transaction that is conditioned upon the execution of definitive documentation by the U.S. Treasury.

The Davis Polk corporate team includes partners John L. Douglas, Margaret E. Tahyar, John H. Butler, Sarah K. Solum and Paul R. Kingsley, and associates Johannes Wirtz, Sapna Dutta, Caroline J. Perry, Pengyu Jeff He, Rahael Seifu, Joey J. Hipolito and Brandon Smith. The tax team includes partner Kathleen L. Ferrell and associates Joshua Ruland, Niya Tang and William A. Curran (not yet admitted). Partner Barbara Nims and associate Bernice A. Grant are providing benefits advice. Members of the Davis Polk team are based in the New York and Menlo Park offices.