Franklin Square Capital Partners is making an investment in NewStar Financial Inc. (Nasdaq: NEWS).
Under the terms of the deal, funds managed by Franklin Square have committed to purchase $300 million in 10-year 8.25 percent subordinated notes and warrants for up to 12 million shares of common stock. Boston-based NewStar expects to use proceeds from the transaction to increase origination volume and facilitate asset growth.
The Franklin Square funds are sub-advised by GSO Capital Partners, the credit division of Blackstone (NYSE: BX). The deal will increase GSO and Franklin Square's access to the lower middle market. In addition to the investment, the relationships should help NewStar find more cross-referral and co-lending deals. GSO and Franklin Square, separately, will consider investing in other NewStar funds.
Franklin Square, headquartered in Philadelphia, is the largest manager of business development companies.
Credit Suisse is NewStar's financial adviser on the investment. Simpson Thacher & Bartlett LLP is the company's legal adviser.
Other debt-related transactions include Bregal Sagemount's increase of its first fund to provide debt to companies, announced in October, and Cowen Group Inc.'s (Nasdaq: COWN) launch of a new finance company, called Cowen Finance, in September.