NewStar Acquires Asset-Based Lender
November 01 2010 - 6:00PM
- Acquired an established middle market, asset-based lender with
a national origination franchise
- Purchase includes loan portfolio with credit commitments
totaling approximately $164 million and funded loans of $73
million
- Talented team of industry veterans led by seasoned
executives
- Added four new regional offices, bolstering existing national
direct origination franchise
- Enhanced funding platform and lending capacity with a $225
million credit facility provided by DZ Bank
- Consistent with strategy to build franchise of specialized
commercial lending businesses
- Expected to be accretive to earnings per share in 2011 with
benefit of cost savings and accretion of discount
NewStar Financial Inc. (Nasdaq:NEWS) announced today that it has
acquired CORE Business Credit LLC ("CORE"), the asset-based lending
business of CORE Financial Holdings LLC, a portfolio company of
American Capital Strategies. The purchase price was approximately
$25 million in cash, or approximately $22 million net of acquired
cash. The transaction was structured as a purchase of the
membership interests of CORE and will be treated as an asset
purchase for tax purposes. The sale proceeds were used to repay $20
million of subordinated debt plus accrued interest and prepayment
penalties and acquire the membership
interests.
As a result of the purchase, NewStar has acquired a portfolio
comprised principally of revolving asset-based loans with credit
commitments totaling approximately $164 million and outstanding
balances of approximately $73 million as of closing. NewStar will
also retain CORE's origination, underwriting, account management
and operations staff to manage and grow the asset-based loan
portfolio.
CORE provides asset-based loans to middle market companies
nationwide. Asset-based loans are typically structured as revolving
lines of credit to fund working capital needs and term loans to
fund permanent working capital and long-term assets for businesses
operating across a wide range of industries. Advances under the
credit facilities are generally governed by a borrowing base that
defines eligibility criteria and advance rates for different
classes of working capital assets. Lending arrangements also
typically include strict controls and reporting requirements,
including dominion over borrowers' cash and discretion to amend
eligibility and advance rates based on the results of regular field
audits and inventory appraisals.
The business will serve as a foundation for NewStar to provide
asset-based lending services to small and medium sized businesses
on a national basis. The company will operate as NewStar Business
Credit after a transition period and will remain headquartered in
Dallas, Texas.
NewStar Business Credit will be led by Michael Haddad, CORE's
current CEO and a seasoned executive in the middle market
asset-based lending industry, who has founded and built several
successful asset-based lending businesses during his career. Prior
to CORE, he co-founded Marquette Business Credit and served as
Executive Vice President.
"This acquisition is consistent with our strategy of building
our franchise with specialized lending platforms that add to our
value proposition for customers and leverage our core strengths in
direct origination and credit management. This transaction also
provides an attractive way to diversify our business mix and
funding platform," said NewStar's Chairman and Chief Executive
Officer Tim Conway. "The team at CORE Business Credit is among the
best in the industry. They have an outstanding track record and
will help reinforce our national origination franchise."
"The transaction is expected to be accretive to earnings," added
John Bray, NewStar's Chief Financial Officer. "We were able to
complete thorough due diligence and re-underwrote each loan. The
terms of the transaction were attractive to us with economic
benefits expected to be derived from a combination of attractive
asset yields, cost synergies and accretion of the purchase
discount. As a result, we expect CORE to generate solid after-tax
returns on equity in 2011."
"We are enthusiastic about the opportunity to add our
established asset-based lending platform to NewStar's national
lending franchise," said Michael Haddad. "Credit availability
continues to be a hurdle for small and mid-sized companies. As a
NewStar Financial company, we can provide more businesses with the
capital they need and add to NewStar's origination and product
capabilities across the country."
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 markets. The Company
specializes in providing senior secured debt financing for the
acquisition or recapitalization of mid-sized companies and
commercial real estate. NewStar originates loans directly through a
team of experienced, senior bankers organized around key industry
and market segments. The Company targets 'hold' positions of up to
$20 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
and Chicago IL.
The NewStar Financial, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=4044
Forward-Looking Statements:
This press release contains forward-looking statements,
including statements regarding NewStar's expected return and
planned growth for the asset-based lending business. These
forward-looking statements involve a number of risks and
uncertainties. Among the important factors that could cause actual
results to differ materially from those results indicated in the
forward-looking statements include uncertainties relating to future
events that could affect CORE's credit performance and level of
earning assets.
CONTACT: NewStar Financial, Inc.
Robert K. Brown
617.848.2558
rbrown@newstarfin.com
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