UPDATE 2-Sterling shares fall 22 pct on dilution worries

* Says Treasury to convert preferred stock

* Says Warburg, THL up stake by 2 percentage points each

* Co will have to issue 4.2 bln shares

* Shares fall 22 pct

(Recasts, adds details, share movement)

Aug 20 (BestGrowthStock) – Shares of Sterling Financial Corp
(STSA.O: ) fell 22 percent on worries of massive dilution from
the conversion of the U.S. Treasury’s $303 preferred stock
investment and increased capital infusion by private-equity
firms.

Sterling will have to issue 4.2 billion shares of common
stock as a result of all investments, including the sale of
155.3 million shares and 3.9 million preferred stock to
accredited investors. It currently has 52.2 million shares
outstanding.

The conversion by the Treasury, however, clears the way for
an investment by Thomas Lee Partners [THL.UL] in the lender,
which was contingent on the company redeeming preferred stock
from the Treasury.

Warburg Pincus and Thomas Lee Partners will together have a
stake of about 45 percent in the company, following their plans
to infuse more capital into the ailing lender.

Thomas Lee and Warburg Pincus will each buy 68.4 million of
common shares and 1.7 million of preferred stock for $171
million as part of the deal, Sterling said.

In May, Thomas Lee and Warburg Pincus had agreed to invest
to invest $278 million in Sterling, giving them about a 41
percent stake in the company. [ID:nSGE64N1PB]

Loss making Sterling has been hit hard by increased levels
of non-performing assets in its residential and commercial
construction loan portfolios, making a return to profitability
difficult.

Shares of Spokane, Washington-based Sterling were trading
down 16 percent at 54 cents in early morning trade on Nasdaq.
It fell to a low of 50 cents at the open.

Excluding today’s losses, the shares have fallen as much as
80 percent from their highs in August last year when the
company had to, for the first time, defer interest payment to
the Treasury.
(Reporting by Sweta Singh in Bangalore; Editing by Aradhana
Aravindan)

UPDATE 2-Sterling shares fall 22 pct on dilution worries