Commercial finance firm NewStar Financial completed a $275 million CLO. The proceeds will be used to refinance existing debt and provide $50 million of new lending capacity.
The offering of NewStar Commercial Loan Trust 2009-1 CLO is NewStar's fourth balance sheet securitization since the firm was started and since the CLO market collapsed as a result of the credit crisis.
Wells Fargo Securities was sole lead manager on the transaction and Guggenheim Partners was the lead investor, purchasing the majority of the notes.
According to a press release from the firm, the securitization of its commercial loans is part of a programmatic approach to its funding strategy. The notes offered through this newest deal are mostly backed by a diversified portfolio of commercial loans originated by NewStar.
The deal was executed through a private offering via Rule 144A. The release said that NewStar placed two classes of notes rated 'Aaa' and 'A2' generating proceeds that reached roughly $187 million and will retain notes and an equity interest. Together these represent 32% of the capital structure or $88 million. The class of notes rated 'Aaa' was priced at Libor plus 375 basis points.
"We believe that this transaction is the first middle market CLO issued since the market collapsed amid the credit crisis," said NewStar CEO Tim Conway. "It is the latest in a series of steps we have taken to strengthen our balance sheet and position the company to capitalize on an attractive market environment. Our ability to return to this market early further underscores the quality of NewStar's track record and direct lending franchise.
He added that, "in 2009, our priorities were to protect the company's balance sheet and maximize liquidity, while managing the impact of a severe economic contraction. It is exciting to be able to achieve these important liquidity and funding objectives and position the Company to return to profitability in 2010."
"The CLO structure continues to provide effective term financing for our balance sheet," said John Frishkopf, head of asset management and treasury at NewStar. "This transaction will fully match-fund a static pool of commercial loans, which will include $50 million of new loans to be originated by NewStar. It will also allow us to leverage our capital more effectively and improve the cash flow dynamics of the loan collateral being financed."
Frishkopf also said that, "this transaction together with the recently announced corporate debt financing greatly strengthens the company's funding platform and positions us well to participate in the economic recovery. We were pleased with level of interest in the transaction generated by Wells Fargo Securities and excited to have Guggenheim Partners as the lead investor."