BOSTON, June 7, 2011 (GLOBE NEWSWIRE) -- NewStar Financial Inc. (Nasdaq:NEWS), a specialized commercial finance company, announced today that it has entered into a five-year, $68 million financing arrangement with Macquarie Bank Limited ("Macquarie") backed by a portfolio of legacy commercial mortgage loans. The financing is structured as a master repurchase agreement under which NewStar sells a portfolio of commercial mortgage loans to Macquarie for $68 million and agrees to repurchase it by June 7, 2016 subject to usual and customary terms and conditions for transactions of this nature. NewStar also provides limited recourse. The proceeds of the transaction are being used to fully repay the Company's credit facility with Citi and refinance all of the commercial mortgage loans previously funded by its warehouse line with Wells Fargo. The transaction generates net proceeds after retirement of debt and transactions costs of approximately $20 million.
The repurchase agreement provides NewStar with long term financing at a more favorable effective advance rate for a substantial portion of its legacy commercial mortgage loan portfolio. As a result, the company has the flexibility to redeploy the net proceeds from the transaction more efficiently to fund new commercial loan growth and other business expansion.
The financing has an effective interest rate based on LIBOR plus a margin. Under the terms of the agreement, NewStar is obligated to reduce the maximum facility balance each quarter by $2.5 million. NewStar is also obligated to repurchase all of the assets by the maturity of the agreement on June 7, 2016. NewStar may, at its option, repurchase all of the loans and terminate the agreement at any time subject to payment of a makewhole amount. The transaction is structured as a financing and does not generate any gains or losses. The commercial mortgage loans and related repurchase obligations will be consolidated and reflected in NewStar's financial statements.
"This transaction represents another in a series of planned financings to re-lever the balance sheet and fund net new loan growth. Refinancing our legacy commercial mortgage portfolio releases trapped capital, which can now be re-deployed more productively. It also enhances our flexibility to add and amend warehouse credit facilities to support our accelerating loan growth," said John Frishkopf, NewStar's Treasurer. "We are also pleased to have developed a relationship with Macquarie, which further diversifies our funding sources," he added.
About NewStar Financial, Inc.:
NewStar Financial (Nasdaq:NEWS) is a specialized commercial finance company focused on meeting the complex financing needs of companies and private investors in the middle market. The Company specializes in providing senior secured debt financing options to mid-sized companies to fund working capital, growth strategies, acquisition and recapitalization, as well as, equipment purchases. NewStar originates loans and leases directly through a team of experienced, senior bankers and marketing officers organized around key industry and market segments. The Company targets 'hold' positions of up to $35 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, Chicago IL, Dallas TX, Los Angeles CA, Philadelphia PA, and Houston TX. For more detailed transaction and contact information, please visit our website at www.newstarfin.com.
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This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this release are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financing plans, strategic plans, objectives and business. As such, they are subject to material risks and uncertainties, including our limited operating history; the general state of the economy; our ability to compete effectively in a highly competitive industry; and the impact of federal, state and local laws and regulations that govern non-depository commercial lenders and businesses generally.
More detailed information about these risk factors can be found in NewStar's filings with the Securities and Exchange Commission, including Item 1A ("Risk Factors") of our 2010 Annual Report on Form 10-K, as supplemented by the Risk Factors contained in our Quarterly Reports on Form 10-Q. NewStar is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
CONTACT: Corporate Inquiries: NewStar Financial Robert K. Brown (617) 848-2558