NewStar Financial has closed the NewStar Berkeley Fund CLO, a USD505 million middle market collateralised loan obligation 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.
The Berkeley Fund is NewStar’s 21st securitisation 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 per cent. Third-party investors retained the equity interests, which represented approximately 10.8 per cent of the capital structure, or approximately USD54.5 million. NewStar held 5 per cent 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 was placement agent and sole book runner. Dechert acted as legal adviser to NewStar.
Tim Conway (pictured), NewStar’s CEO says: “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 first 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 optimise their returns.”
NewStar’s treasurer, Mike Eisenstein, adds: “The Berkeley Fund CLO also demonstrates NewStar's strong presence in the capital markets where we are recognised 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 securitisation programs and recognise 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.”