NewStar Financial announced it closed the NewStar Clarendon Fund, a $400 million middle market CLO used to provide leverage for a managed credit fund anchored by an investment from funds sponsored by Franklin Square Capital Partners and sub-advised by GSO Capital, the credit division of Blackstone.
The Clarendon Fund is the third credit fund established by NewStar to co-invest in middle market commercial loans originated by the company. Citigroup Global Markets Inc. was placement agent and sole book runner.
NewStar also reported preliminary results of its loan origination activities for the fourth quarter of 2014, which reflected a significant increase in volume compared to the third quarter due in part to the strategic relationship. Based on preliminary results, the company grew assets under management to more than $3.3 billion at the end of the fourth quarter from approximately $2.6 billion at the end of the third quarter.
Growth in the quarter was driven by approximately $780 million of new loan originations, which was up 90% from the third quarter. The increase in lending volume was due in part to benefits derived from its new strategic relationship, including access to new channels of origination and the new fund formation, as well as an ability to provide larger capital commitments and offer more complete financing options to customers.
The company also announced that it has increased the size of a syndicated credit facility agented by Wells Fargo by $100 million to $375 million and amended certain other terms to provide additional flexibility to support anticipated continued growth in lending activity. The credit facility includes an accordion option to increase it to $425 million.
Tim Conway, NewStar’s CEO, said, “Our relationship with GSO and Franklin Square represents a powerful combination that is already driving growth and exceeding our expectations. As these early results demonstrate, we are working together effectively to provide larger capital commitments to our customers, open up new channels of origination and form new investment vehicles. We now expect the GSO/Franklin Square strategic investment in the company to be accretive to our returns on equity by the fourth quarter of 2015. It is also worth noting that while there are some interesting dislocations resulting from volatility in the energy markets, our current credit exposure to energy sectors is limited to just 1% of our portfolio.”
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