NewStar Completes $75 Million Corporate Debt Financing
Revolving Credit Facility Provides Liquidity Buffer and Improves Company's Financial Flexibility
BOSTON, Jan. 5, 2010 (GLOBE NEWSWIRE) -- NewStar Financial Inc. (Nasdaq:NEWS), a specialized commercial finance company, announced today that it has placed $75 million of senior secured revolving notes due 2013 with Drawbridge Special Opportunities, a fund managed by an affiliate of Fortress Investment Group.
The revolving notes provide NewStar with significant financial flexibility and a liquidity buffer to protect against potential unexpected adverse business conditions. The revolving structure of the notes allows the company to draw, repay and draw again prior to the maturity date, subject to NewStar's compliance with a borrowing base tied to the value of underlying unencumbered assets and the residual equity value in its financing subsidiaries. The company may use the proceeds from future advances under the notes for working capital and other general corporate purposes. It represents an efficient way to provide contingent liquidity as a buffer against potential adverse credit or economic conditions and also improves the company's flexibility to manage its loan portfolio through the economic recovery.
Advances under the notes are priced on a grid tied to usage, which was Libor plus 9.00% at closing. The Company will pay a fee on the unused commitment based on usage ranging from 2% to 4%. The notes mature June 30, 2013. The maximum commitment of the notes will reduce by 20% after 18 months and then by 10% every three months until maturity. NewStar may reduce the commitment amount of the notes by $25 million at its option up to twelve months from closing subject to a 50 bp penalty. The notes may also be called in their entirety at any time prior to the first, second and third anniversaries of the closing date subject to a 3%, 2%, and 1% prepayment penalty, respectively. Scheduled reductions in the commitment amount are not subject to penalty. As of the closing date, the Company had not borrowed under the notes.
Natixis Securities North America, Inc. advised NewStar on the financing.
"This transaction represents another important milestone for NewStar. In 2009, we restructured the balance sheet to reduce short term debt and liquidity risk. This transaction completes our strategy to build a conservative liquidity buffer sufficient to withstand a wide range of potential adverse economic scenarios and provide the financial flexibility we need to manage through the remainder of the credit cycle and begin to revitalize our lending activities. Our ability to raise additional capital underscores the strength of our track record and middle market franchise as well as the value of our direct origination platform," said NewStar CEO, Tim Conway.
"The structure of the financing as a revolving credit facility at the corporate level provides an efficient way for us to meet our contingent liquidity needs. The facility provides capacity to fund assets that may be ineligible for other financing programs and other general corporate purposes," said John Frishkopf, head of asset management and treasury at NewStar.
About NewStar Financial, Inc.:
NewStar Financial is a specialized commercial finance company focused on meeting the complex financing needs of companies and private investors in the middle markets. The Company specializes in providing senior secured debt financing for the acquisition or recapitalization of mid-sized companies and commercial real estate. NewStar originates loans directly through a team of experienced, senior bankers organized around key industry and market segments. The Company targets 'hold' positions of up to $20 million and selectively underwrites or arranges larger transactions for syndication to other lenders.
NewStar is headquartered in Boston MA and has regional offices in Darien CT and Chicago IL. In December of 2006, NewStar completed an Initial Public Offering. The Company's shares trade on the NASDAQ under the ticker symbol, NEWS. Please visit our website at www.newstarfin.com for more detailed transaction and contact information.
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CONTACT: NewStar Financial
Robert K. Brown
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