UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
Under the Securities Exchange Act of 1934
(Amendment No. 2)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED
PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO
FILED PURSUANT TO RULE 13d-2(a)
NovaStar Financial, Inc.
(Name of Issuer)
Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
669947400
(CUSIP Number)
Dominic Blue
Massachusetts Life Insurance Company
1295 State Street
Springfield, MA 01111
(800)767-1000
with a copy to:
Larry A. Barden, Esq.
Sidley Austin LLP
1 South Dearborn
Chicago, Illinois 60603
(312)853-7000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
June 23, 2011
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement
on Schedule 13G to report the acquisition that is the
subject of this Schedule 13D, and is filing this
schedule because of 240.13d-1(e), 240.13d-1(f) or
240.13d-1(g), check the following box (_)
Note: Schedules filed in paper format shall include a
signed original and five copies of the schedule,
including all exhibits. See 240.13d-7 for other
parties to whom copies are to be sent.
(Continued on following pages)
Page 1 of 9 Pages
SCHEDULE 13D
CUSIP No. 669947400 Page 2 of 9 Pages
1 Names of Reporting Persons
Massachusetts Mutual Life Insurance Company
I.R.S Identification No. 04-1590850
2 Check the Appropriate Box if a Member of a Group
(a)
(b)
3 SEC Use Only
4 Source of Funds
WC
5 Check if Disclosure of Legal Proceedings Is
Required Pursuant to Items 2(d) or 2(e)
Not Applicable
6 Citizenship or Place of Organization
Massachusetts
Number of
Shares
Beneficially
Owned By
Each
Reporting
Person
With
7 Sole Voting Power
0
8 Shared Voting Power
18,794,250 (1)(2)
9 Sole Dispositive Power
0
10 Shared Dispositive Power
18,794,250(1)(2)
11 Aggregate Amount Beneficially Owned by Each
Reporting Person
18,794,250(1)(2)
12 Check if the Aggregate Amount in Row (11)
Excludes Certain Shares
Not Applicable
13 Percent of Class Represented By Amount in
Row (11)
20.80% (3)
14 Type of Reporting Person
CO
(1) On December 10, 2010, Massachusetts Mutual Life Insurance Company,
a Massachusetts corporation ("MassMutual"), entered into an Exchange
Agreement (the "Exchange Agreement") with Jefferies Capital Partners IV L.P.,
Jefferies Employee Partners IV LLC, and JCP Partners IV LLC (collectively,
"Jefferies") and NovaStar Financial, Inc., a Maryland corporation (the
"Company"), which is incorporated herein by reference to Exhibit 6 hereto.
Pursuant to the Exchange Agreement, on June 23, 2011, MassMutual exchanged
1,050,000 shares of the Company's 9.00% Series D1 Mandatory Convertible
Preferred Stock, par value $0.01 ("Series D Preferred Stock"), for 18,581,000
shares of the Company's Common Stock, par value $0.01 per share ("Common
Stock"),and $688,500 in cash (the "Exchange Transaction").
(2) MassMutual is the beneficial owner of 18,794,250 shares of Common Stock
held in one or more advisory accounts and private investment funds. Babson
Capital Management LLC, a Delaware limited liability company ("Babson
Capital") acts as investment adviser to these advisory accounts and private
investment funds, and as such may also be deemed to be the beneficial owner
of the 18,794,250 shares.
(3) Based on 90,353,653 shares of Common Stock outstanding as of August 11,
2011,as reported in the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 2011. The percentage that appears in row 13 has been rounded
up from 20.75% to the nearest tenth of a percent in accordance with the
instruction to Rule 13d-101.
CUSIP No. 669947400 Page 3 of 9 Pages
1 Names of Reporting Persons
Babson Capital Management LLC
I.R.S Identification No. 51-0504477
2 Check the Appropriate Box if a Member of a Group
(a)
(b)
3 SEC Use Only
4 Source of Funds
WC
5 Check if Disclosure of Legal Proceedings Is
Required Pursuant to Items 2(d) or 2(e)
Not Applicable
6 Citizenship or Place of Organization
Delaware
Number of
Shares
Beneficially
Owned By
Each
Reporting
Person
With
7 Sole Voting Power
0
8 Shared Voting Power
18,794,250 (1)
9 Sole Dispositive Power
0
10 Shared Dispositive Power
18,794,250(1)
11 Aggregate Amount Beneficially Owned by Each
Reporting Person
18,794,250(1)
12 Check if the Aggregate Amount in Row (11)
Excludes Certain Shares
Not Applicable
13 Percent of Class Represented By Amount in
Row (11)
20.80%(2)
14 Type of Reporting Person
IA
(1) Babson Capital in its capacity as investment adviser, may be deemed to be
the beneficial owner of 18,794,250 shares of Common Stock, held in certain
advisory accounts and private investment funds owned (directly or indirectly)
or controlled by MassMutual.
(2) Based on 90,353,653 shares of Common Stock outstanding as of August 11,
2011,as reported in the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 2011. The percentage that appears in row 13 has been rounded
up from 20.75% to the nearest tenth of a percent in accordance with the
instruction to Rule 13d-101.
SCHEDULE 13D
CUSIP No. 669947400 Page 4 of 9 Pages
This Amendment No. 2 to Schedule 13D relating to the Company
is being filed on behalf of the undersigned to amend the Schedule
13D filed with the Securities and Exchange Commission (the
"Commission") on July 26, 2007, as amended by Amendment No. 1 to
Schedule 13D filed with the Commission on October 9, 2007 (as
amended, the "Schedule 13D"). Capitalized terms not otherwise
defined herein have the meanings given them in the Schedule 13D.
Item 1. Security and Issuer
The second sentence of Item 1 is hereby amended and restated in
its entirety as follows:
The principal executive offices of the Company are located at
2114 Central Street, Suite 600, Kansas City, MO 64108.
Item 2. Identity and Background
Item 2(c) is hereby amended and restated in its entirety as follows:
(c)The principal business of MassMutual is that of a diversified
financial services organization providing financial products and
services that include mutual funds, money management, trust
services, retirement planning products, life insurance, annuities,
disability income insurance, and long-term care insurance. The
officers and directors of MassMutual, who are all citizens of
the United States, are as follows:
Officers:
Roger W. Crandall, Chairman, President and Chief Executive Officer
Robert M. Casale, Executive Vice President and Chief Information Officer
M. Timothy Corbett, Executive Vice President and Chief Investment Officer
Michael R. Fanning, Executive Vice President, U.S. Insurance Group
Debra A. Palermino, Executive Vice President, Human Resources
Michael T. Rollings, Executive Vice President and Chief Financial Officer
Mark Roellig, Executive Vice President and General Counsel
Elaine A. Sarsynski, Executive Vice President, Retirement Services
Board of Directors:
Thomas C. Barry
Cristobal I. Conde
Kathleen A. Corbet
Roger W. Crandall - Chairman
James H. DeGraffenreidt, Jr.
Patricia Diaz Dennis
Robert A. Essner
Robert M. Furek
Raymond W. LeBoeuf
Cathy E. Minehan
Marc F. Racicot
William T. Spitz
H. Todd Stitzer
The principal business of Babson Capital is that of an entrepreneurial
capital management firm focused on creating innovative investment
strategies and solutions for sophisticated investors. The officers and
managers of Babson Capital, who (except as set forth below) are all
citizens of the United States, are as follows:
SCHEDULE 13D
CUSIP No. 669947400 Page 5 of 9 Pages
Officers:
Thomas M. Finke, Chairman and Chief Executive Officer
Clifford M. Noreen, President and Managing Director
David J. Brennan, Vice Chairman and Managing Director*
Bernadette M. Clegg, Chief Financial Officer, Treasurer and Managing Director
Paul J. Thompson, Chief Operating Officer and Managing Director
John F. Robbins, Chief Compliance Officer and Managing Director
Susan A. Moore, Chief Administrative Officer and Managing Director
Michael D. Batsimm, Controller and Director
Christopher A. DeFrancis, Co-General Counsel, Secretary and Managing Director
Shelden M. Francis, Co-General Counsel, Secretary and Managing Director
Richard F. Buckley, Jr.,Managing Director,Senior Counsel and Assistant Secretary
Steven J. Katz, Senior Counsel and Managing Director
Tiffany P. Marosits, Counsel and Assistant Secretary
Managers:
Thomas M. Finke - Chairman
Clifford M. Noreen
Michael T. Rollings
David J. Brennan*
* Mr. Brennan is a UK citizen
Item 3. Source and Amount of Funds or Other Consideration
Item 3 is hereby amended and restated in its entirety as follows:
On December 10, 2010, MassMutual entered into the Exchange Agreement,
which is incorporated herein by reference to Exhibit 6 hereto.
Pursuant to the Exchange Agreement, on June 23, 2011, MassMutual
exchanged 1,050,000 shares of the Company's Series D Preferred Stock
for 18,581,000 shares of Common Stock and $688,500 in cash. As of
June 23, 2011, MassMutual, through certain of its affiliates for which
Babson Capital acts as investment adviser, owned 213,250 shares of
Common Stock acquired by such affiliates of MassMutual in the ordinary
course of business. The funds used to purchase the 1,050,000 shares of
Series D Preferred Stock exchanged by MassMutual under the Exchange
Agreement and shares of Common Stock owned through certain of its
affiliates for which Babson Capital acts as investment adviser,
came directly or indirectly from the working capital of MassMutual.
Item 4. Purpose of Transaction
The information in Item 4 is hereby amended and supplemented as follows:
Exchange Agreement
On December 10, 2010, MassMutual entered into an Exchange
Agreement, which is incorporated herein by reference to
Exhibit 6 hereto. Pursuant to the Exchange Agreement, MassMutual
agreed, subject to the satisfaction of certain conditions set
forth therein, to exchange all shares of Series D Preferred Stock
held by MassMutual for 18,581,000 shares of Common Stock and $688,500.
SCHEDULE 13D
CUSIP No. 669947400 Page 6 of 9 Pages
Lock-Up Period
Pursuant to the terms of the Exchange Agreement, MassMutual is not be
permitted to sell or transfer (except for transfers to any wholly owned
subsidiary of MassMutual that is part of its consolidated group of
companies) any shares of Common Stock, Series C Preferred Stock or Series
D Preferred Stock until the earlier of (a) the termination of the Exchange
Agreement or (b) the earliest of (i) three years after the closing of the
Exchange Transaction, (ii) the occurrence of an "ownership change" under
Section 1.382 of the applicable income tax regulations, (iii) the Company's
board of directors takes action that will result in an "ownership change"
under Section 1.382 of the applicable income tax regulations, or (iv) a
determination by the Company's board of directors that the Company's
net operating loss tax benefits will not be realized in whole or in part
(the "Lock-Up Period").
Board Observer/Director
Pursuant to the terms of the Exchange Agreement, after the date of closing
of the Exchange Transaction and during the Lock-Up Period, MassMutual has
the right to designate one board observer (without voting rights) or one
director (with voting rights) of the Company. In the event MassMutual
elects to designate a director, the Company will be required to use its
reasonable best efforts to expand the size of its board of directors by
one position and appoint the individual designated by MassMutual to fill
the new position.
Consummation of the Exchange Transaction and Execution of the Registration
Rights and Shareholders Agreement
On June 23, 2011, the Exchange Transaction was consummated pursuant to the
terms of the Exchange Agreement and, in connection therewith, MassMutual
received an aggregate of 18,581,000 shares of Common Stock and $688,500 in
cash in exchange for all shares of Series D Preferred Stock held by
MassMutual. In connection with the consummation of the Exchange Transaction,
pursuant to the terms of the Exchange Agreement, the Company, Jefferies and
MassMutual executed a Registration Rights and Shareholders Agreement, dated
as of June 23, 2011, incorporated herein by reference to Exhibit 7,
committing the Company to register the shares of Common Stock that MassMutual
and Jefferies received in the Exchange Transaction.
Item 5. Interest in Securities of the Issuer
Item 5 is hereby amended and restated in its entirety as follows:
(a) As of June 23, 2011, MassMutual beneficially owned
18,581,000 shares of Common Stock, or approximately 20.6% of the
Common Stock deemed issued and outstanding as of that date. In
addition, as of June 23, 2011, certain affiliates of MassMutual
for which Babson Capital acts as investment adviser owned 213,250
shares of Common Stock, or approximately 0.2% of the Common Stock
deemed issued and outstanding as of that date. As of June 23, 2011,
MassMutual and Babson Capital may each be deemed to have beneficially
owned in the aggregate 18,794,250 shares of Common Stock, or
approximately 20.8% of the Common Stock deemed issued and outstanding
as of that date. The percentages set forth above are based on 90,353,653
shares of Common Stock outstanding as of August 11, 2011, as reported
in the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 2011.
(b) MassMutual has shared power with Babson Capital to vote and dispose
of 18,794,250 shares of Common Stock for which it is deemed the beneficial
owner. Babson Capital has shared power with MassMutual to vote and dispose
of 18,794,250 shares of Common Stock for which it is deemed the beneficial
owner.
(c) Other than the transactions described in this Schedule 13D, during the
sixty days on or prior to June 23, 2011, there were no transactions in Common
Stock, or securities convertible into, exercisable for or exchangeable for
Common Stock, by the Reporting Persons.
(d) Not Applicable.
(e) Not Applicable.
SCHEDULE 13D
CUSIP No. 669947400 Page 7 of 9 Pages
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer
The information in Item 6 is hereby amended and supplemented as follows:
The information set forth in Item 4 above is incorporated into this Item
6 by reference.
Item 7. Material to be Filed as Exhibits
Exhibit Number Description
1 Joint Filing Agreement relating to Amendment No. 2 to Schedule
13D between MassMutual and Babson Capital.
6 Exchange Agreement, dated as of December 10, 2010, by and among
NovaStar Financial Inc., Massachusetts Mutual Life Insurance Company,
Jefferies Capital Partners IV LP, Jefferies Employee Partners IV LLC,
and JCP Partners IV LLC, incorporated by reference to Exhibit (d)(2) to
the Schedule 13E-3/TO filed by NovaStar Financial, Inc. with the Securities
and Exchange Commission on December 10, 2010.
7 Registration Rights and Shareholders Agreement, dated as of June 23,
2011, by and among NovaStar Financial Inc., Massachusetts Mutual Life
Insurance Company, Jefferies Capital Partners IV LP, Jefferies Employee
Partners IV LLC, and JCP Partners IV LLC, incorporated by reference to
Exhibit 4.1 to the Form 8-K filed by NovaStar Financial, Inc. with the
Securities and Exchange Commission on June 29, 2011.
SCHEDULE 13D
CUSIP No. 669947400 Page 8 of 9 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true,
complete and correct.
Dated: September 9, 2011
By: MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
/s/ Dominic Blue
Name: Dominic Blue
By: BABSON CAPITAL MANAGEMENT LLC
/s/ Christopher A. DeFrancis
Name: Christopher A. DeFrancis
SCHEDULE 13D
CUSIP No. 669947400 Page 9 of 9 Pages
Exhibit 1
AGREEMENT REGARDING THE JOINT FILING OF
AMENDMENT NO. 2 TO SCHEDULE 13D
______________________________
The undersigned hereby agree that the Amendment No. 2 to statement
on Schedule 13D to which this Agreement is annexed as Exhibit 1 is
filed on behalf of each of them in accordance with the provisions
of Rule 13d-1(k) under the Securities Exchange Act of 1934, as
amended.
Dated: September 9, 2011