NewStar Financial announced that it completed a $348 million term debt securitization known as NewStar Commercial Loan Funding 2016-1. All floating rate classes of notes were priced at par.
NewStar Commercial Loan Funding 2016-1 was the Company’s 13th collateralized loan obligation since inception and part of a programmatic approach to its funding strategy. The notes were backed by a diversified portfolio of commercial loans originated by NewStar. The transaction was executed through a private offering via Rule 144A and Regulation S. Six classes of notes rated Aaa through Ba3 by Moody’s and two classes rated AAA by Fitch, totaling approximately $197 million, were placed. NewStar retained the Class D Notes, Class E Notes and the subordinated interests, which represented approximately 26% of the capital structure, or about $92 million. The deal was structured in a manner intended to satisfy European risk retention rules and included a small fixed rate tranche, rated Aaa/AAA, to meet specific investor demand.
"This transaction represents our thirteenth middle market CLO to date and our first deal of the year, which brings our total CLO issuance to over $5.4 billion. Our leading track record of issuance in this market underscores the value investors place in NewStar’s middle market franchise and credit management platform," said NewStar CEO, Tim Conway.
John Frishkopf, head of asset management and treasury at NewStar said, “We were pleased by the speed and quality of execution by the Wells Fargo and Capital One teams and the level of support among repeat investors who continue to commit capital to our balance sheet securitization programs.” Mike Eisenstein, managing director in asset management and treasury at NewStar added, “The execution reflects NewStar’s deep access to the capital markets, our distinguished securitization track record and leading position as both a CLO and ABS issuer. We were also pleased to continue to broaden and diversify our investor base by introducing three new institutional investors to our platform and welcomed the participation of seven accounts that have committed capital to previous NewStar offerings.”
NewStar Financial will serve as collateral manager of the CLO, which has a 4 year reinvestment period. The notes were rated by Moody’s Investors Service and the A-1 and A-2 classes were also rated by Fitch. All variable rate notes were priced to yield a weighted average spread of approximately Libor plus 2.78%.
Wells Fargo Securities was lead placement agent and Capital One Securities was co-lead placement agent. Dechert LLP served as legal advisor to the issuer, the retention holder and collateral manager and Cadwalader, Wickersham & Taft LLP served as legal advisor to Wells Fargo Securities. U.S. Bank National Association will serve as trustee and paying agent.