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NewStar Completes $200MM Institutional Term Loan Financing

May 17, 2013, 07:18 AM
Filed Under: Lender Finance

NewStar Financial Inc. announced that it has amended and restated its senior secured notes to increase the amount to $200 million, extend the term to five years and reduce the interest rate among other things. The notes were rated BB- by Standard & Poor's and NewStar was assigned a BB- corporate rating with a Stable outlook in connection with the transaction.
Key terms of the note agreement have been amended and restated to, among other things:

  • Increase the facility size to $200 million from $125 million (of which $100 million was outstanding), consisting of $170 million of funded term notes and $30 million of delayed draw term loan commitments
  • Extend the final maturity of the facility to May 11, 2018 from August 31, 2016 with a $25 million tranche scheduled to mature May 11, 2017
  • Reduce borrowing costs to Libor plus 4.50% with a 1.00% Libor floor from Libor plus 7.00% with a 1.50% Libor floor
  • Allow for early repayment of the notes subject to a 1% prepayment fee, if repaid from the proceeds of a new financing prior to May 13, 2014, or at par, if from operating cash, other sources or due to change of control
  • Eliminate the borrowing base structure and related restrictive features

Add an accordion feature that enables the Company to request up to $100 million of additional notes to be issued under the facility or pari passu with the facility

"Completing a $200 million institutional term loan deal and receiving a BB- rating from S&P represent important new milestones for NewStar as we focus on growth opportunities and strategy options. The notes provide ample capital to support planned growth and significantly improve our financial flexibility, while also improving our cost of funds by replacing higher cost debt," said NewStar CEO, Tim Conway.

"Although we considered a range of available options for this financing including an unsecured debt issuance, we were able to avoid substantially higher issuance costs by amending our existing note agreement. This amendment also adds to our financial flexibility by permitting us to prepay at any time while maintaining our ability to raise incremental secured debt backed by separate pools of collateral," said NewStar Treasurer, John Frishkopf.

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