Boston-based NewStar Financial has increased the size of its NewStar Arlington Senior Loan Program to $400 million and completed a term debt securitisation to provide leverage for the fund.
The program was previously valued at $300 million and was originally formed in April last year in conjunction with institutional investors that signed on to co-invest in middle market commercial loans originated by NewStar.
The firm also recently completed a $400 million loan securitisation in step with the expansion of the program and as part of a strategy to employ leverage, it said in a statement earlier this week. The Arlington Senior Loan Program marks NewStar’s ninth securitisation since its founding ten years ago.
“The expansion of this program represents another significant milestone in our strategy to grow our asset management business,” said Tim Conway, NewStar’s chief executive, in a release. “It reinforces the value of NewStar’s origination and credit management capabilities, as well as the appeal of our track record to investors.”
The underlying notes in the CLO are backed by a diverse portfolio of commercial loans rated AAA to B2 and valued at approximately $360 million, representing an advance rate of 90 percent. External investors kept the equity interests, which totaled 10 percent of the capital structure or about $40 million. NewStar will be the portfolio manager of the CLO, which has a four-year reinvestment period.
Some features of the deal included a class of step-up notes priced at a starting rate of L+153 bps to meet specific investor demand. The next class of triple-A rated notes were priced at L+175 bps. The notes were rated by one agency and were priced to yield at a weighted average of LIBOR plus 2.78 percent. Wells Fargo was the placement agent and book runner on the transaction.
NewStar Financial specializes in providing a range of senior secured debt financing options to mid-sized companies. It originates loans and conducts direct lending through its own team of senior bankers and marketing officers that are organized around industry and market segments. The firm usually provides anywhere from $5 million to $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.
NewStar was founded by Conway in 2004 and has so far completed five loan securitizations totaling approximately $1.8 billion. The firm funds its lending activity through equity capital, credit facilities and term debt securitizations. NewStar is headquartered in Boston and has eight additional offices across the US.