FREE MEMBERSHIP Includes » ABL Advisor eNews + iData Blasts | JOIN NOW ABLAdvisor Gray ABLAdvisor Blue
Skip Navigation LinksHome / News / Read News


NewStar Closes $400MM Fund, Reports Increase in Loan Originations

January 16, 2015, 07:39 AM
Filed Under: Industry News

NewStar Financial anounced that it has closed the NewStar Clarendon Fund CLO (the "Clarendon Fund" or the "Fund"), a $400 million middle market CLO used to provide leverage for a managed credit fund anchored by an investment from funds sponsored by Franklin Square Capital Partners and sub-advised by GSO Capital, the credit division of Blackstone. The Clarendon Fund is the third credit fund established by NewStar to co-invest in middle market commercial loans originated by the Company. The launch of this fund represents another step in the growth of NewStar's asset management platform and is a significant milestone in the development of the Company's broader strategic relationship with GSO and Franklin Square to help expand its lending and asset management platforms.

NewStar also reported preliminary results of its loan origination activities for the fourth quarter of 2014, which reflected a significant increase in volume compared to the third quarter due in part to the strategic relationship. Based on preliminary results, the company grew assets under management to more than $3.3 billion at the end of the fourth quarter from approximately $2.6 billion at the end of the third quarter. Growth in the quarter was driven by approximately $780 million of new loan originations, which was up 90% from the third quarter. The increase in lending volume was due in part to benefits derived from its new strategic relationship, including access to new channels of origination and the new fund formation, as well as an ability to provide larger capital commitments and offer more complete financing options to customers. The company intends to report its fiscal fourth quarter financial results, including final results with respect to loan origination and assets under management, on February 11, 2015. The preliminary results included herein are subject to change and do not include our complete financial results for the quarter and the full year.

The company also announced that it has increased the size of a syndicated credit facility agented by Wells Fargo by $100 million to $375 million and amended certain other terms to provide additional flexibility to support anticipated continued growth in lending activity. The credit facility includes an accordion option to increase it to $425 million.

Commenting on these milestones, Tim Conway, NewStar's CEO stated: "Our relationship with GSO and Franklin Square represents a powerful combination that is already driving growth and exceeding our expectations. As these early results demonstrate, we are working together effectively to provide larger capital commitments to our customers, open up new channels of origination and form new investment vehicles. We now expect the GSO/Franklin Square strategic investment in the company to be accretive to our returns on equity by the fourth quarter of 2015. It is also worth noting that while there are some interesting dislocations resulting from volatility in the energy markets, our current credit exposure to energy sectors is limited to just 1% of our portfolio."

NewStar completed a $400 million loan securitization in connection with the launch of the Clarendon Fund to employ leverage as part of its investment strategy. The Clarendon Fund CLO is NewStar's tenth securitization since inception and third transaction priced since the beginning of 2014. The notes offered through this CLO transaction are backed by a diversified portfolio of commercial loans originated or purchased and underwritten by NewStar for the benefit of investors. Various classes of notes rated Aaa through Ba3 were placed, which represented an advance rate of approximately 88.2%. Third-party investors led by Franklin Square funds sub-advised by GSO Capital retained the equity interests, which together represented approximately 11.8% of the capital structure, or approximately $48 million. NewStar also holds 5% of each class of note to satisfy EU risk retention rules and will serve as manager of the CLO, which has a four-year reinvestment period. 

Citigroup Global Markets Inc. was placement agent and sole book runner.

Comments From Our Members

You must be an ABL Advisor member to post comments. Login or Join Now.