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NovaStar Financial, Inc. Announces Investment of $48.8 Million by MassMutual and Jefferies Capital Partners As Part of Commitment to Raise $150 Million in New Equity.

Article Excerpt
And announces four-for-one reverse stock split

KANSAS CITY, Mo., July 16 /PRNewswire-FirstCall/ -- NovaStar Financial, Inc. , a residential lender and mortgage portfolio manager, today announced that it has entered into a definitive securities purchase agreement, a standby purchase agreement and other agreements pursuant to which affiliates of MassMutual Capital Partners LLC (collectively "MassMutual") along with funds managed by Jefferies Capital Partners IV LLC ("Jefferies Capital Partners") have purchased $48.8 million of convertible preferred stock and are committed, subject to certain conditions, to purchase up to $101.2 million of any unsubscribed shares of an upcoming Shareholder Rights Offering for a similar series of convertible preferred stock. These transactions, including the Rights Offering, will raise $150 million in equity for NovaStar.

These strategic transactions encompass several related agreements and decisions:

-- Conclusion of the NovaStar Board of Directors' process to explore strategic alternatives. -- Upfront equity investment of $48.8 million by MassMutual and Jefferies Capital Partners. -- Shareholder Rights Offering of $101.2 million enabling participation by NovaStar common stock holders. -- Agreement by MassMutual and Jefferies Capital Partners to backstop the Rights Offering. -- Four-for-one reverse stock split of NovaStar common stock. -- Distribution of a REIT dividend for approximately $157 million in the form of NovaStar preferred securities. -- Corporate governance change, adding board members nominated by the new investors.

"We are pleased to announce this equity investment and to welcome MassMutual and Jefferies Capital Partners, two of the nation's top financial institutions, as shareholders. These steps will strengthen our financial position and establish NovaStar as one of the leading independent lenders and portfolio managers in the nonconforming mortgage sector," said Scott Hartman, Chairman and Chief Executive Officer of NovaStar. "Our review of strategic alternatives looked at many options, and the Board concluded that the best way to maximize long-term shareholder value is to move forward with a stronger balance sheet and a commitment to continuing to meet the mortgage needs of America's homeowners."

Today's announcement completes the previously announced formal process of exploring strategic alternatives. Deutsche Bank Securities Inc. advised NovaStar in this process, while Stifel, Nicolaus & Company, Incorporated advised the independent committee of the NovaStar Board of Directors.

Larry N. Port, President of MassMutual Capital Partners LLC, said: "This equity commitment to NovaStar fits our focus on strategically investing in business opportunities, particularly in the financial services industry, where we have significant experience and expertise. We view NovaStar as a well-managed company with long-term potential." MassMutual Capital Partners LLC is a wholly owned subsidiary of Massachusetts Mutual Life Insurance Company (MassMutual) specializing in private equity, mergers and acquisitions and other global business development that leverages the broad industry knowledge of its parent and affiliated investment managers....

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