NewStar Financial has launched a $400 collateralized loan obligation that complies with European risk retention standards, according to Fitch Ratings.

NewStar Commercial Loan Funding 2015-2 LLC will issue two tranches of notes with a preliminary ‘AAA’ rating from Fitch: $205 million of class A-1 notes being marketed at three month-Libor plus 200 basis points and $23 million of class A-2 notes marketed at a fixed rate of 3.167%. Both benefit from credit enhancement of 43%

Fitch is not rating any of the subordinated notes to be issued via the transaction.

Wells Fargo Securities is the arranger and initial purchaser.

Proceeds will be used to purchase a portfolio of loans to small and medium-sized companies that were originated by NewStar.

The CLO will have an approximately four-year reinvestment period, during which discretionary sales are permitted at any time, other than during a restricted trading period, and are limited to 30% of the portfolio during any 12 month period and subject to certain other conditions. The collateral manager will be permitted to sell defaulted assets, equity securities and credit-risk and credit-improved obligations at any time, including after the reinvestment period

The deal is non-callable for two years.

The transaction features provisions intended to achieve compliance with European risk retention guidelines. A wholly owned affiliate of the manager is expected to retain 100% of the membership interests and there are provisions to ensure that at least 50% of the underlying collateral will be either originated or seasoned by the manager or its affiliates.

Established in 2004, NewStar had approximately $4.1 billion of managed assets and $656 million of equity capital as of March 31, 2015, according to Fitch. The firm has issued 11 middle-market CLOs with a total transaction value of $4.7 billion. Its CLO issuance is primarily a means to fund its balance sheet lending activity.

This CLO is smaller than the firms’ previous deal, the $500 million NewStar Commercial Funding 2015-1, completed in March.

NewStar Financial has launched a $400 collateralized loan obligation that complies with European risk retention standards, according to Fitch Ratings.

NewStar Commercial Loan Funding 2015-2 LLC will issue two tranches of notes with a preliminary ‘AAA’ rating from Fitch: $205 million of class A-1 notes being marketed at three month-Libor plus 200 basis points and $23 million of class A-2 notes marketed at a fixed rate of 3.167%. Both benefit from credit enhancement of 43%

Fitch is not rating any of the subordinated notes to be issued via the transaction.

Wells Fargo Securities is the arranger and initial purchaser.

Proceeds will be used to purchase a portfolio of loans to small and medium-sized companies that were originated by NewStar.

The CLO will have an approximately four-year reinvestment period, during which discretionary sales are permitted at any time, other than during a restricted trading period, and are limited to 30% of the portfolio during any 12 month period and subject to certain other conditions. The collateral manager will be permitted to sell defaulted assets, equity securities and credit-risk and credit-improved obligations at any time, including after the reinvestment period

The deal is non-callable for two years.

The transaction features provisions intended to achieve compliance with European risk retention guidelines. A wholly owned affiliate of the manager is expected to retain 100% of the membership interests and there are provisions to ensure that at least 50% of the underlying collateral will be either originated or seasoned by the manager or its affiliates.

Established in 2004, NewStar had approximately $4.1 billion of managed assets and $656 million of equity capital as of March 31, 2015, according to Fitch. The firm has issued 11 middle-market CLOs with a total transaction value of $4.7 billion. Its CLO issuance is primarily a means to fund its balance sheet lending activity.

This CLO is smaller than the firms’ previous deal, the $500 million NewStar Commercial Funding 2015-1, completed in March.

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