NovaStar Financial Corp., a specialty finance real estate investment trust, announced an initial public offering of 3.75 million shares at $18 per share.

The company will use 90% of the capital raised to buy wholesale loans from its affiliate, NovaStar Mortgage Inc., and to buy mortgage securities.

Stifel, Nicolaus & Co. is the deal's lead manager, with NationsBanc Montgomery Securities Inc. as co-manager. The underwriters have an option to buy up to 562,500 additional shares of NovaStar stock to cover overallotments, if necessary.

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