NewStar Financial sells equipment finance business

NewStar Financial has announced the sale of its equipment finance business and related assets to Boston-based Radius Bank, a federal savings association, for approximately $140 million in cash.

Launched in 2011, NewStar Equipment Finance is an independent provider of flexible, equipment financing solutions to middle market companies nationwide. It has expanded significantly over the last five years under the leadership of industry veteran, Steve O’Leary.

The transaction was structured as a sale of the business platform and related assets, and generated net proceeds to NewStar of approximately $105 million. The sale of the equipment finance platform demonstrates a continuation of the company’s transformation from a bank-styled, diversified commercial finance company into a more specialized middle market direct lender with a focus on managing assets for institutional investors.

It also reflects a strategic decision to exit businesses with economic models increasingly challenged by competition from banks and other lenders with access to lower cost funding.

NewStar’s CEO Tim Conway commented: “I believe this transaction is a positive for all parties involved. The leasing platform is a great fit with Radius’ growth strategy and being part of a bank should provide a significant competitive advantage that will allow the team and the business to achieve their true potential.”

He went on to add: “For NewStar, the transaction generates an attractive financial return and further demonstrates the intrinsic value of our direct lending platforms that we believe is not fully recognized in our current share price. The successful sales of both our equipment finance and asset-based lending businesses have added significantly to our liquidity position and enabled us to streamline the company’s operations, which is expected to reduce our cost base by more than 30% from our first quarter run-rate and improve returns.”