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NewStar Expands Arlington Senior Loan Program to $400MM

July 02, 2014, 07:27 AM
Filed Under: Industry News

NewStar Financial has increased the size of the NewStar Arlington Senior Loan Program (the "Arlington Fund" or the "Program") to $400 million and completed a term debt securitization to provide leverage for the Program. The Arlington Fund was formed in partnership with institutional investors in April 2013 to co-invest in middle market commercial loans originated by NewStar. The expansion of the Program represents the next step in the growth of NewStar's asset management platform and is expected to add to its assets under management (AUM) as the proceeds from the transaction are invested. The Program also provides important strategic benefits to NewStar, including increasing its lending capacity, which allows it to provide more capital to clients, while managing risk exposure.

NewStar completed a $400 million loan securitization in connection with the expansion of the Program as part of its investment strategy to employ leverage in order to magnify returns to investors. The Arlington Senior Loan Program is NewStar's ninth securitization since inception and part of a programmatic approach to the company's funding and asset management strategies.

The deal was structured with several innovative features including a class of step-up notes priced at an initial rate of L+153 bps to meet specific investor demand. The other class of Aaa rated notes were priced at L+175 bps. The notes were rated by a single agency and were priced to yield a weighted average of LIBOR plus 2.78%. Wells Fargo Securities was placement agent and sole book runner.

Following completion of the CLO transaction, NewStar expects that the financial results of the Program will not be consolidated with its financial results beginning in the second quarter of 2014. The assets, liabilities and related operating results of the Arlington Fund had previously been included in NewStar's consolidated financial results as a variable interest entity ("VIE").

"The expansion of this program represents another significant milestone in our strategy to grow our asset management business," said Tim Conway, NewStar's CEO. "It reinforces the value of NewStar's origination and credit management capabilities, as well as the appeal of our track record to investors. I believe that NewStar is among only a few established platforms in the middle market positioned to provide access to investment opportunities like the Arlington Senior Loan Program," he added.

"With NewStar's w-eslltablished position as a programmatic, middle market CLO issuer and the market's strong receptivity to the deal, we were able to structure a transaction with competitive cost of funds and a robust structure that achieves our investors' objectives. It represents the second CLO NewStar executed in 2014," said John Frishkopf, head of asset management and treasury at NewStar.

NewStar Financial is a specialized commercial finance company focused on meeting the complex financing needs of companies and private investors in the middle markets. The company specializes in providing a range of senior secured debt financing options to mid-sized companies to fund working capital, growth strategies, acquisitions and recapitalizations, as well as equipment purchases. NewStar originates loans and leases directly through teams of experienced senior bankers and marketing officers organized around key industry and market segments.

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