UPDATE 2-NewStar Financial posts narrower-than-expected Q3 loss

* Q3 adj loss/shr $0.19 vs est -$0.28

* Says amends credit facility

* Sees issuing corporate debt

* Shares up 20 pct (Recasts, adds details, analyst comments; updates share movement)

By Abhinav Sharma

Nov 4 (Reuters) - Commercial finance company NewStar Financial Inc (NEWS.O) posted a narrower-than-expected quarterly loss and said it extended a credit facility with Citigroup to November 2010, sending its shares up as much as 20 percent. The stock is reacting positively because the company was able to renew its warehouse line of credit and due to encouraging comments by NewStar regarding its ability to access debt-capital markets, analyst David Long of William Blair & Co said.

The company, a provider of debt financing solutions to middle-market businesses and commercial real estate borrowers, said it reduced debt by about $100 million in the third quarter.

The company amended its existing credit facility with Citi and reduced the size of the facility to $150 million from $300 million.

"We now have 90 percent of our assets funded with long-term capital and expect to bolster our liquidity position through the issuance of new corporate debt," Chief Financial Officer John Bray said in a press release.

For the third quarter, the company posted a loss of $10.3 million, or 21 cents a share, compared with a profit of $7.6 million, or 16 cents a share, a year earlier.

On an adjusted basis, it reported a loss of 19 cents a share.

Three analysts on average expected the company to post a loss of 28 cents a share, according to Thomson Reuters I/B/E/S.

Provision for credit losses fell sequentially to $32.6 million from $36.2 million.

Net interest income rose 4 percent sequentially to $24.5 million.

NewStar Financial also said it reduced headcount to 66 from 82 shortly after quarter end and expects to save about $1.5 million annually.

Shares of the company were trading up 15 percent at $2.95 Wednesday midday on the New York Stock Exchange. They touched a high of $3.07 earlier in the session.

(Reporting by Abhinav Sharma in Bangalore; Editing by Aradhana Aravindan)