NewStar Financial Inc. announced that it has closed the NewStar Berkeley Fund CLO (the “Berkeley Fund” or the “Fund”), a $505 million middle-market CLO managed for qualified institutional investors. The Berkeley Fund is the fourth credit fund sponsored by NewStar to co-invest in middle market commercial loans originated through its direct lending platform and represents another significant milestone in the growth of the Company’s asset management business.
The Berkeley Fund is NewStar’s 21st securitization since inception and third transaction completed in 2016. The notes offered through this CLO transaction are backed by a diversified portfolio of commercial loans originated and underwritten by NewStar for the benefit of investors. Various classes of notes rated Aaa through Ba3 were placed, which represented an advance rate of approximately 88.6%. Third-party investors retained the equity interests, which represented approximately 10.8% of the capital structure, or approximately $54.5 million. NewStar held 5% of each class of notes to satisfy risk retention rules and will serve as manager of the CLO, which has a four-year reinvestment period.
Citigroup Global Markets Inc. was placement agent and sole book runner. Dechert LLP acted as legal adviser to NewStar.
Commenting on the new fund, Tim Conway, NewStar’s CEO stated: “The Berkeley Fund represents another important milestone for our asset management strategy. It also highlights important advantages that we believe NewStar can offer institutional investors who are looking for attractive yields with downside asset protection. First, investors in our funds are able to leverage our established direct lending franchise and extensive balance sheet lending programs to generate proprietary investment opportunities that provide attractive value relative to other fixed income investment options. Second, our investment strategies are defensive, with a focus on 1st lien senior debt, which we believe offers the best combination of yield and position in the capital structure for this stage in the credit cycle. And importantly, we can use our balance sheet to provide risk-retention solutions and pre-ramp portfolios to help investors optimize their returns.”
NewStar’s Treasurer, Mike Eisenstein added: “The Berkeley Fund CLO also demonstrates NewStar's strong presence in the capital markets where we are recognized for our distinguished track record as a leading issuer of CLOs backed by both middle market and liquid loan collateral. As a result, we have strong support among a core group of repeat investors who continue to commit capital to our securitization programs and recognize the merits of middle market direct lending. We were pleased to partner with the Citigroup Global Markets team on this deal and always appreciate the quality of transaction execution they deliver.”
NewStar Financial, Inc. is an internally-managed, commercial finance company with $6.6 billion of assets managed across two complementary business lines — middle-market direct lending and asset management.