NewStar Financial Closes Fourth Managed Credit Fund At $505M

Dec 2 2016 | 11:27pm ET

Boston-based NewStar Financial has launched its fourth managed credit fund to focus on middle market senior debt originating through the firm’s direct lending platform. 

The new fund, named NewStar Berkeley Fund CLO, is a collateralized loan obligation vehicle managed for qualified institutional investors, the company said in a statement.  It is the fourth credit fund sponsored by NewStar to co-invest in middle market commercial loans and represents a new milestone in the growth of the Company's asset management business. 

The Berkeley Fund is NewStar's 21st securitization since inception, the company said, and its third in 2016. Notes offered through this CLO transaction are backed by a diversified portfolio of commercial loans originated and underwritten by NewStar for the benefit of investors, with classes of notes rated Aaa through Ba3 placed and equaling an advance rate of approximately 88.6%. 

Third-party investors retained the equity interests, which represented approximately 10.8% of the vehicle’s capital structure or approximately $54.5 million, NewStar added. The company held back 5% of each class of notes in order to meet risk retention rules,  and it 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, while Dechert LLP acted as legal adviser to NewStar.

"The Berkeley Fund highlights important advantages that we believe NewStar can offer institutional investors who are looking for attractive yields with downside asset protection,” commented NewStar CEO Tim Conway. “First, investors in our funds are able to leverage our established direct lending franchise and extensive balance sheet lending programs to generate proprietary investment opportunities that provide attractive value relative to other fixed income investment options.

"Second, our investment strategies are defensive, with a focus on first-lien senior debt, which we believe offers the best combination of yield and position in the capital structure for this stage in the credit cycle.  And importantly, we can use our balance sheet to provide risk-retention solutions and pre-ramp portfolios to help investors optimize their returns," he added. 

NewStar Financial is an internally-managed, commercial finance company with $6.6 billion of assets managed across two complementary business lines – middle market direct lending and asset management. The company manages more than $1.3 billion of assets in a series of private credit funds that co-invest in middle market loans originated through its established leveraged finance lending platform and its strategic relationship with BlackStone's GSO Capital.

Through its wholly-owned subsidiary, NewStar Capital, the firm also manages more than $2 billion across a series of CLOs that invest primarily in broadly syndicated, non-investment grade loans, as well as other sponsored funds and managed accounts focused on non-investment grade loans and bonds. 


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