NewStar Acquires Fifth Street's CLO Management Unit

Jul 7 2017 | 5:06pm ET

Boston-based NewStar Financial has agreed to acquire Fifth Street Asset Management’s middle market CLO management business, named Fifth Street CLO Management LLC, in a move that brings some $726 million in managed assets under its umbrella.

The estimated purchase price is approximately $16 million, net of $13 million of assumed indebtedness and will be subject to adjustment up or down based on certain working capital items as of the closing of the transaction, NewStar said in a statement. The transaction is expected to close in the third quarter, subject to certain investor consents and other closing conditions, and will result in an increase of the company’s total pro forma AUM to approximately $7.3 billion.

Seward & Kissel LLP served as NewStar's legal counsel and GreensLedge Capital Markets LLC as advisor on the transaction, the company added. It is expected to be accretive to NewStar’s EPS this year. 

FSCM was formed in 2015 by Fifth Street to manage its middle market CLO business. The firm currently manages two CLOs backed by middle market loans and holds certain interests in its sponsored CLOs primarily to comply with regulatory risk retention requirements.

The deal is NewStar’s second transaction in the past 18 months, as the company focuses on expanding its asset management platform though new fund launches, acquiring investment management platforms and increasing its investment activity. The FSCM acquisition is highly complementary to the company’s existing middle market direct lending business, NewStar said, and provides balance to its overall asset management platform. It also adds significantly to the company’s lending capacity.

NewStar Financial is an internally-managed commercial finance company with $6.6 billion of assets managed across two complementary business lines - middle market direct lending and asset management. The Company's direct lending activities are focused on meeting the complex financing needs of middle market companies, while its asset management platforms offer a range of investment products employing credit-oriented strategies focused on middle market loans and liquid, tradeable credit.  

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