NewStar forms co-invest lending fund

NewStar Financial has closed a vehicle that will co-invest in mid-market commercial loans originated by the firm.

The leveraged credit fund, named NewStar Arlington Fund, includes investment capital from institutional investors and is expected to grow to approximately $300 million in assets under management, according to a statement. Wells Fargo and NewStar provided a $175 million credit facility to a subsidiary of Arlington Fund that will be used to partially fund investments in a portfolio of eligible senior secured middle market loans.

The Arlington fund has already been deployed to purchase $30 million in credit commitments originated by the firm in the fourth quarter, NewStar said.

The firm views the co-investment vehicle as a relatively low-cost, high-margin tool that allows it to “write a bigger cheque” for its customers, said one source. NewStar retains full discretion of the fund’s investment decisions, according to a statement.

“It reinforces the value of NewStar's origination and credit management capabilities, as well as the appeal of our track record to investors,” said NewStar chief executive officer Tim Conway in a statement.  

NewStar’s leveraged finance business specialises in providing between $5 million and $150 million in loans to companies in the business services, consumer products, environmental, manufacturing, healthcare, media, restaurant, retail, transportation and distribution industries, according to its website. The firm offers revolvers and term loans, stretch senior loans and second lien transactions.

NewStar, founded by Conway 2004, already has $600 million assets under management through its NewStar Credit Opportunities Fund, which closed in 2005. The firm funds its lending activity through equity capital, credit facilities and term debt securitisations, per its website.