NewStar Financial has closed its latest collateralised loan obligation with $505 million to invest in mid-market loans, blowing past its original target of $400 million, the firm said on Wednesday.
Through the Berkeley Fund CLO, the firm will offer notes backed by a portfolio of commercial loans originated and underwritten by NewStar, in classes rated Aaa through Ba3 and an advance rate of 88.6 percent, the company also said. The firm will serve as the manager of the CLO, which has a four-year reinvestment period. A company spokesperson was not immediately available to answer questions about return rates.
Tim Conway, CEO at NewStar, said in a statement that this latest CLO represents the firm’s “defensive” investment strategies, focusing on first lien senior debt in order to offer investors “the best combination of yield and position in the capital structure for this stage in the credit cycle”.
Mike Eisenstein, treasurer at NewStar, added that the CLO’s commitments include capital from several undisclosed “repeat investors”.
The Boston-based direct lending and asset management company held 5 percent of each class of notes from the fund, in order to satisfy risk retention rules – which require lenders to hold a percentage of qualifying securities on its balance sheet – coming into effect at the end of this month.
The closing marks the firm’s fourth mid-market senior debt CLO and its 21st securitisation since its founding in 2004, according to the statement. In March 2015, NewStar issued a $496 million CLO. Its second CLO of the year came in September when it closed a $410 million deal.
NewStar specialises in providing senior secured debt to mid-sized companies with $6.6 billion of assets managed across its direct lending and asset management businesses.