NewStar offers $397.81 million CLO; middle-market deal pipeline grows following lull

By Cristal Cody

Tupelo, Miss., Sept. 2 – The middle-market CLO space is expected to see more activity after a quiet August.

NewStar Financial, Inc. is in the deal pipeline with a $397.81 million transaction, its second middle-market CLO offering in 2015.

Fifth Street CLO Management LLC also plans to price the $416.6 million Fifth Street SLF II Ltd./Fifth Street SLF II LLC middle-market deal via Natixis Securities America LLC.

About $4 billion of middle-market CLOs have priced year to date, according to informed sources and Prospect News data.

CLO managers priced $7.2 billion of middle-market CLOs in 2014.

The last middle-market CLO transactions brought to market were in July from GC Investment Management LLC and BMO Asset Management Corp.

In the second quarter, middle-market CLO AAA notes priced 35 basis points wider than those from broadly syndicated loan CLOs, according to Wells Fargo Securities, LLC.

Broadly syndicated AAA notes have priced on average in the Libor plus 150 bps area.

NewStar preps CLO

NewStar Financial plans to price $397.81 million of notes and membership interests due 2027 in the NewStar Commercial Loan Funding 2015-2 LLC deal, according to a source.

The offering includes $205 million of class A-1 floating-rate notes (//AAA); $23 million of class A-2 fixed-rate notes (//AAA); $40 million of class B floating-rate notes; $26.25 million of class C floating-rate notes; $28.5 million of class D floating-rate notes; $28.25 million of class E floating-rate notes and $46.81 million of membership interests.

Wells Fargo Securities, LLC is the placement agent.

NewStar Financial will manage the CLO.

The CLO has a two-year non-call period and a four-year reinvestment period.

The transaction is backed primarily by senior secured loans, cash and eligible investments.

Proceeds from the deal will be used to purchase a $400 million portfolio of middle-market loans.

NewStar Financial previously was in the primary market on March 11 with the $496.1 million NewStar Commercial Loan Funding 2015-1 LLC deal.

The Boston-based middle-market commercial lender priced three CLO transactions in 2014.

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