By Jennifer Chiou
New York, Nov. 5 – NewStar Financial, Inc. announced that placed the initial $200 million of its previously reported up to $300 million offering of 8.25% subordinated notes due 2024 to funds managed by Franklin Square Capital Partners.
As stated, the strategic investment is expected to be completed in multiple closings with an additional $100 million of the notes within one year in one or more tranches of no less than $25 million.
According to an 8-K filing with the Securities and Exchange Commission, NewStar, GSO Capital Partners, the credit division of Blackstone, and Franklin Square have formed a strategic relationship to help expand NewStar’s lower middle-market lending and asset management activities.
The Franklin Square funds committed in early November to purchase $200 million of the subordinated notes by the end of the year.
The initial issue includes warrants exercisable for 9.5 million shares of common stock at an exercise price of $12.62, the filing stated. The company’s stock closed at $10.88 (Nasdaq: NEWS) on Dec. 3.
The 10-year warrants will be issued and sold in two tranches. The first tranche of warrants represents 19.9% of the company’s outstanding shares. The second tranche will be exercisable for about 2.5 million shares.
The company said that it has entered into separate voting agreements with certain stockholders, which include management, in which they have committed to vote their shares in favor of the issuance of the second tranche of warrants.
The notes include a payment-in-kind feature that allows the company, at its option, to elect to have interest accrued at a rate of 8.75% added to the principal of the notes instead of paying it in cash.
The notes are callable during the first three years with payment of a make-whole premium. The prepayment premium decreases to 103% and 101% after the third and fourth anniversaries of the closing, respectively. They are callable at par after year five.
NewStar is a Boston-based middle-market commercial lender.
| Issuer: | NewStar Financial, Inc.
|
| Issue: | Subordinated notes
|
| Amount: | $300 million (maximum)
|
| Maturity: | 2024
|
| Coupon: | 8.25% in cash or 8.75% in kind
|
| Call option: | With make-whole premium during first three years; prepayment premium of 103% in year three and 101% in year four; at par in year five
|
| Warrants: | For 9.5 million shares in initial tranche
|
| Warrant expiration: | 10 years
|
| Warrant strike price: | $12.62
|
| Investor: | Franklin Square Capital Partners
|
| Announcement date: | Nov. 5
|
| Settlement date: | Dec. 4 (for $200 million)
|
|
|
© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere.
For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.
