Sterling planning tender offers for $238 million of trust preferreds

By Angela McDaniels

Tacoma, Wash., Feb. 1 - Sterling Financial Corp. plans to begin tender offers and consent solicitations for 10 series of trust preferred securities with a total outstanding principal amount of $238 million, according to an 8-K filing with the Securities and Exchange Commission.

The trust preferreds that will be eligible for the offer are:

• Sterling Capital Trust VII's $55 million trust preferreds;

• Sterling Capital Trust VIII's $50 million trust preferreds;

• Sterling Capital Trust IX's $45 million trust preferreds;

• Sterling Capital Statutory Trust V's $20 million trust preferreds;

• Klamath First Capital Trust I's $15 million trust preferreds;

• Sterling Capital Trust III's $14 million trust preferreds;

• Lynwood Capital Trust II's $10 million trust preferreds;

• Sterling Capital Trust VI's $10 million trust preferreds;

• Sterling Capital Trust IV's $10 million trust preferreds; and

• Lynwood Capital Trust I's $9 million trust preferreds.

Holders will be offered $200 for each $1,000 principal amount of trust preferreds.

Each of the offers will be conditioned on the receipt of enough consents to make the proposed amendments to the indenture governing the notes underlying that series of trust preferreds, the applicable trust agreement and the related guarantee to remove or waive the covenant that prohibits Sterling from purchasing any other series of trust preferreds while the subject series of trust preferreds is in deferral.

In the case of trust preferreds held by unmanaged collateralized debt obligation vehicles, Sterling expects that the acceptance of the offer and approval of the related amendments will require the consent of the securityholders of the CDO.

The consummation of each offer will also be conditioned on Sterling's receipt of enough proceeds from an equity offering, sale of assets or other financing transaction to purchase the tendered trust preferreds and the approval, to the extent required, by banking regulators of the financing transaction and the purchase price for the trust preferreds.

Sterling said that if some holders accept the offers but the amendments are not approved for one or more series of trust preferreds, then the company may be required to pay the accrued interest due on those series of trust preferreds in order to address restrictions on repurchases during interest deferral periods. Sterling said it plans to then resume deferring interest beginning on the next interest payment date.

TBC Securities, LLC is expected to be the dealer manager for the tender offers.

Sterling is exploring options for raising the funds needed for the offers, but it said there is no assurance that the financing condition will be satisfied.

Sterling is a bank holding company based in Spokane, Wash.

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