UNITED STATES
                        SECURITIES EXCHANGE COMMISSION
                            Washington, D.C. 20549

-------------------------------------------------------------------------------


                                 SCHEDULE 13G

                   Under the Securities Exchange Act of 1934
                               (Amendment No. 1)*

                            NEWSTAR FINANCIAL, INC.
                            -----------------------
                               (Name of Issuer)


                    Common Stock, $0.01 par value per share
                    ---------------------------------------
                        (Title of Class of Securities)


                                   65251F105
                               ----------------
                                (CUSIP Number)


                               December 31, 2007
                            ----------------------
            (Date of Event which Requires Filing of this Statement)


Check the appropriate box to designate the rule pursuant to which this
Schedule is filed:

                            [ ]    Rule 13d-1(b)

                            [X]    Rule 13d-1(c)

                            [ ]    Rule 13d-1(d)

* The  remainder  of this  cover  page  shall be  filled  out for a  reporting
person's  initial  filing on this form with  respect to the  subject  class of
securities,  and for any subsequent  amendment  containing  information  which
would alter the disclosures provided in a prior cover page.

The  information  required  in the  remainder  of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities  Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however,  see
the Notes).


                         Continued on following pages
                              Page 1 of 14 Pages






                                 SCHEDULE 13G

CUSIP No.: 65251F105                                         Page 2 of 14 Pages
-------------------------------------------------------------------------------

1.      Names of Reporting Persons.

        I.R.S. Identification Nos. of above persons (entities only).



        SAB CAPITAL PARTNERS, L.P.
-------------------------------------------------------------------------------
2.      Check the Appropriate Box if a Member of a Group

        (a) [X]

        (b) [ ]
-------------------------------------------------------------------------------
3.      SEC Use Only
-------------------------------------------------------------------------------
4.      Citizenship or Place of Organization


        Delaware
-------------------------------------------------------------------------------

Number of             5.      Sole Voting Power                  - 0 -
Shares               ----------------------------------------------------------
Beneficially          6.      Shared Voting Power                956,052
Owned by Each        ----------------------------------------------------------
Reporting             7.      Sole Dispositive Power             - 0 -
Person With          ----------------------------------------------------------
                      8.      Shared Dispositive Power           956,052
-------------------------------------------------------------------------------
9.      Aggregate Amount Beneficially Owned by Each Reporting Person


        956,052
-------------------------------------------------------------------------------
10.     Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See
        Instructions)


        [  ]
-------------------------------------------------------------------------------
11.     Percent of Class Represented by Amount in Row (9)


        2.2% based on 43,429,519 shares outstanding.
-------------------------------------------------------------------------------
12.     Type of Reporting Person:


        PN





                                 SCHEDULE 13G

CUSIP No.: 65251F105                                         Page 3 of 14 Pages
-------------------------------------------------------------------------------

1.      Names of Reporting Persons.

        I.R.S. Identification Nos. of above persons (entities only).



        SAB CAPITAL PARTNERS II, L.P.
-------------------------------------------------------------------------------
2.      Check the Appropriate Box if a Member of a Group

        (a) [X]

        (b) [ ]
-------------------------------------------------------------------------------
3.      SEC Use Only
-------------------------------------------------------------------------------
4.      Citizenship or Place of Organization


        Delaware
-------------------------------------------------------------------------------

Number of             5.      Sole Voting Power                  - 0 -
Shares               ----------------------------------------------------------
Beneficially          6.      Shared Voting Power                21,183
Owned by Each        ----------------------------------------------------------
Reporting             7.      Sole Dispositive Power             - 0 -
Person With          ----------------------------------------------------------
                      8.      Shared Dispositive Power           21,183
-------------------------------------------------------------------------------
9.      Aggregate Amount Beneficially Owned by Each Reporting Person


        21,183
-------------------------------------------------------------------------------
10.     Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See
        Instructions)


        [  ]
-------------------------------------------------------------------------------
11.     Percent of Class Represented by Amount in Row (9)


        0.05% based on 43,429,519 shares outstanding.
-------------------------------------------------------------------------------
12.     Type of Reporting Person:


        PN





                                 SCHEDULE 13G

CUSIP No.: 65251F105                                         Page 4 of 14 Pages
-------------------------------------------------------------------------------

1.      Names of Reporting Persons.

        I.R.S. Identification Nos. of above persons (entities only).



        SAB OVERSEAS MASTER FUND, L.P.
-------------------------------------------------------------------------------
2.      Check the Appropriate Box if a Member of a Group

        (a) [X]

        (b) [ ]
-------------------------------------------------------------------------------
3.      SEC Use Only
-------------------------------------------------------------------------------
4.      Citizenship or Place of Organization


        Cayman Islands
-------------------------------------------------------------------------------

Number of             5.      Sole Voting Power                  - 0 -
Shares               ----------------------------------------------------------
Beneficially          6.      Shared Voting Power                396,330
Owned by Each        ----------------------------------------------------------
Reporting             7.      Sole Dispositive Power             - 0 -
Person With          ----------------------------------------------------------
                      8.      Shared Dispositive Power           396,330
-------------------------------------------------------------------------------
9.      Aggregate Amount Beneficially Owned by Each Reporting Person


        396,330
-------------------------------------------------------------------------------
10.     Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See
        Instructions)


        [  ]
-------------------------------------------------------------------------------
11.     Percent of Class Represented by Amount in Row (9)


        0.91% based on 43,429,519 shares outstanding.
-------------------------------------------------------------------------------
12.     Type of Reporting Person:


        PN






                                 SCHEDULE 13G

CUSIP No.: 65251F105                                         Page 5 of 14 Pages
-------------------------------------------------------------------------------

1.      Names of Reporting Persons.

        I.R.S. Identification Nos. of above persons (entities only).



        SAB CAPITAL ADVISORS, L.L.C.
-------------------------------------------------------------------------------
2.      Check the Appropriate Box if a Member of a Group

        (a) [X]

        (b) [ ]
-------------------------------------------------------------------------------
3.      SEC Use Only
-------------------------------------------------------------------------------
4.      Citizenship or Place of Organization


        Delaware
-------------------------------------------------------------------------------

Number of             5.      Sole Voting Power                  - 0 -
Shares               ----------------------------------------------------------
Beneficially          6.      Shared Voting Power                1,373,565
Owned by Each        ----------------------------------------------------------
Reporting             7.      Sole Dispositive Power             - 0 -
Person With          ----------------------------------------------------------
                      8.      Shared Dispositive Power           1,373,565
-------------------------------------------------------------------------------
9.      Aggregate Amount Beneficially Owned by Each Reporting Person


        1,373,565
-------------------------------------------------------------------------------
10.     Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See
        Instructions)


        [  ]
-------------------------------------------------------------------------------
11.     Percent of Class Represented by Amount in Row (9)


        3.16% based on 43,429,519 shares outstanding.
-------------------------------------------------------------------------------
12.     Type of Reporting Person:


        OO





                                 SCHEDULE 13G

CUSIP No.: 65251F105                                         Page 6 of 14 Pages
-------------------------------------------------------------------------------

1.      Names of Reporting Persons.

        I.R.S. Identification Nos. of above persons (entities only).



        SAB CAPITAL MANAGEMENT, L.P.
-------------------------------------------------------------------------------
2.      Check the Appropriate Box if a Member of a Group

        (a) [X]

        (b) [ ]
-------------------------------------------------------------------------------
3.      SEC Use Only
-------------------------------------------------------------------------------
4.      Citizenship or Place of Organization


        Delaware
-------------------------------------------------------------------------------

Number of             5.      Sole Voting Power                  - 0 -
Shares               ----------------------------------------------------------
Beneficially          6.      Shared Voting Power                1,373,565
Owned by Each        ----------------------------------------------------------
Reporting             7.      Sole Dispositive Power             - 0 -
Person With          ----------------------------------------------------------
                      8.      Shared Dispositive Power           1,373,565
-------------------------------------------------------------------------------
9.      Aggregate Amount Beneficially Owned by Each Reporting Person


        1,373,565
-------------------------------------------------------------------------------
10.     Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See
        Instructions)


        [  ]
-------------------------------------------------------------------------------
11.     Percent of Class Represented by Amount in Row (9)


        3.16% based on 43,429,519 shares outstanding.
-------------------------------------------------------------------------------
12.     Type of Reporting Person:


        PN





                                 SCHEDULE 13G

CUSIP No.: 65251F105                                         Page 7 of 14 Pages
-------------------------------------------------------------------------------

1.      Names of Reporting Persons.

        I.R.S. Identification Nos. of above persons (entities only).



        SAB CAPITAL MANAGEMENT, L.L.C.
-------------------------------------------------------------------------------
2.      Check the Appropriate Box if a Member of a Group

        (a) [X]

        (b) [ ]
-------------------------------------------------------------------------------
3.      SEC Use Only
-------------------------------------------------------------------------------
4.      Citizenship or Place of Organization


        Delaware
-------------------------------------------------------------------------------

Number of             5.      Sole Voting Power                  - 0 -
Shares               ----------------------------------------------------------
Beneficially          6.      Shared Voting Power                1,373,565
Owned by Each        ----------------------------------------------------------
Reporting             7.      Sole Dispositive Power             - 0 -
Person With          ----------------------------------------------------------
                      8.      Shared Dispositive Power           1,373,565
-------------------------------------------------------------------------------
9.      Aggregate Amount Beneficially Owned by Each Reporting Person


        1,373,565
-------------------------------------------------------------------------------
10.     Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See
        Instructions)


        [  ]
-------------------------------------------------------------------------------
11.     Percent of Class Represented by Amount in Row (9)


        3.16% based on 43,429,519 shares outstanding.
-------------------------------------------------------------------------------
12.     Type of Reporting Person:


        OO





                                 SCHEDULE 13G

CUSIP No.: 65251F105                                         Page 8 of 14 Pages
-------------------------------------------------------------------------------

1.      Names of Reporting Persons.

        I.R.S. Identification Nos. of above persons (entities only).



        SCOTT A. BOMMER
-------------------------------------------------------------------------------
2.      Check the Appropriate Box if a Member of a Group

        (a) [X]

        (b) [ ]
-------------------------------------------------------------------------------
3.      SEC Use Only
-------------------------------------------------------------------------------
4.      Citizenship or Place of Organization


        United States of America
-------------------------------------------------------------------------------

Number of             5.      Sole Voting Power                  - 0 -
Shares               ----------------------------------------------------------
Beneficially          6.      Shared Voting Power                1,373,565
Owned by Each        ----------------------------------------------------------
Reporting             7.      Sole Dispositive Power             - 0 -
Person With          ----------------------------------------------------------
                      8.      Shared Dispositive Power           1,373,565
-------------------------------------------------------------------------------
9.      Aggregate Amount Beneficially Owned by Each Reporting Person


        1,373,565
-------------------------------------------------------------------------------
10.     Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See
        Instructions)


        [  ]
-------------------------------------------------------------------------------
11.     Percent of Class Represented by Amount in Row (9)


        3.16% based on 43,429,519 shares outstanding.
-------------------------------------------------------------------------------
12.     Type of Reporting Person:


        IN





                                                             Page 9 of 14 Pages



Item 1(a).      Name of Issuer:

                NewStar Financial, Inc. (the "Issuer").

Item 1(b).      Address of Issuer's Principal Executive Offices:

                500 Boylston Street, Suite 1600, Boston, MA  02116.

Item 2(a)       Name of Person Filing:

                This  Statement  is filed on behalf  of each of the  following
Persons (collectively, the "Reporting Persons"):

                i) SAB Capital Partners, L.P. ("SAB");

                ii) SAB Capital   Partners II, L.P.  ("SAB  II", and  together
with SAB, the "Domestic Partnerships");

                iii) SAB Overseas Master Fund, L.P. (the "Master Fund");

                iv) SAB Capital Advisors, L.L.C. (the "General Partner");

                v)  SAB Capital Management, L.P. (the "Investment Manager");

                vi)  SAB Capital Management, L.L.C. (the "IMGP"); and

                vii)  Scott A. Bommer ("Mr. Bommer").

                This Statement  relates to Shares (as defined herein) held for
the accounts of each of SAB, SAB II, and the Master Fund. The General  Partner
serves as the general  partner of each of the  Domestic  Partnerships  and the
Master Fund. The Investment  Manager serves as the investment  manager of each
of the  Domestic  Partnerships  and the Master  Fund.  The IMGP  serves as the
general partner of the Investment  Manager.  Mr. Bommer serves as the managing
member of each of the General Partner and IMGP.

                Any disclosures  herein with respect to persons other than the
Reporting  Persons are made on information  and belief after making inquiry to
the appropriate party.

Item 2(b).      Address  of Principal Business Office  or, if None, Residence:

                The address of the  principal  business  office of each of the
Reporting Persons is 767 Fifth Avenue, 21st Floor, New York, New  York  10153.

Item 2(c).      Citizenship:

                i)   SAB is a Delaware limited partnership;

                ii)  SAB II is a Delaware limited partnership;





                                                            Page 10 of 14 Pages


                iii) The Master Fund is a Cayman Islands exempted limited
                     partnership;

                iv)  The General Partner is a Delaware limited liability
                     company;

                v)   The Investment Manager is a Delaware limited partnership;

                vi)  The IMGP is a Delaware limited liability company; and

                v)   Mr. Bommer is a citizen of the United States of America.


Item 2(d).      Title of Class of Securities:

                Common Stock, $0.01 par value per share (the "Shares")

Item 2(e).      CUSIP Number:

                65251F105

Item 3.         If This Statement is Filed Pursuant to  ss.ss.240.13d-1(b)  or
                240.13d-2(b) or (c), Check Whether the Person Filing is a:

                This Item 3 is not applicable.

Item 4.         Ownership:

Item 4(a).      Amount Beneficially Owned

                As of December 31, 2007

                (a)  SAB may be deemed to be the beneficial owner of 956,052
Shares held for its account;

                (b)  SAB II may be deemed to be the beneficial owner of 21,183
Shares held for its account;

                (c)  The Master Fund may be deemed to be the beneficial owner
of 396,330 Shares held for its account; and

                (d) Each of the General Partner,  Investment Manager, IMGP and
Mr. Bommer may be deemed to be the beneficial  owner of 1,373,565  Shares held
for the  accounts  of each of SAB,  SAB II, and the Master  Fund.  This amount
includes:  A) 956,052  Shares held for the account of SAB; B) 21,183  Shares
held for the account of SAB II; and C) 396,330  Shares held for the account of
the Master Fund.

Item 4(b).      Percent of Class:

                (a) As of  December  31,  2007 the number of Shares SAB may be
deemed to be the  beneficial  owner of constitutes  approximately  2.2% of the
total number of Shares  outstanding  (based upon  information  provided by the
Issuer in its most  recently  filed  proxy  statement  on DEF 14A  there  were
approximately 43,429,519 shares outstanding as of December 7, 2007).





                                                            Page 11 of 14 Pages


                (b) As of December 31,  2007,  the number of Shares SAB II may
be deemed to be the beneficial owner of constitutes approximately 0.05% of the
total number of Shares  outstanding  (based upon  information  provided by the
Issuer in its most recently  filed proxy  statement on Form DEF 14A there were
approximately 43,429,519 shares outstanding as of December 7, 2007).

                (c) As of December 31,  2007,  the number of Shares the Master
Fund may be deemed to be the  beneficial  owner of  constitutes  approximately
0.91% of the total  number  of  Shares  outstanding  (based  upon  information
provided by the Issuer in its most recently filed proxy  statement on Form DEF
14 there were  approximately  43,429,519 shares  outstanding as of December 7,
2007).

                (d) As of December 31, 2007,  the number of Shares the General
Partner,  the Investment Manager,  the IMGP and Mr. Bommer may be deemed to be
the beneficial owner of constitutes approximately 3.16% of the total number of
Shares outstanding (based upon information  provided by the Issuer in its most
recently  filed  proxy  statement  on Form DEF 14A  there  were  approximately
43,429,519 shares outstanding as of December 7, 2007).

Item 4(c).      Number of Shares of which such person has:

SAB:
----

(i) Sole power to vote or direct the vote:                                   0
(ii) Shared power to vote or direct the vote:                          956,052
(iii) Sole power to dispose or direct the disposition of:                    0
(iv) Shared power to dispose or direct the disposition of:             956,052

SAB II:
-------

(i) Sole power to vote or direct the vote:                                   0
(ii) Shared power to vote or direct the vote:                           21,183
(iii) Sole power to dispose or direct the disposition of:                    0
(iv) Shared power to dispose or direct the disposition of:              21,183

The Master Fund:
----------------

(i) Sole power to vote or direct the vote:                                   0
(ii) Shared power to vote or direct the vote:                          396,330
(iii) Sole power to dispose or direct the disposition of:                    0
(iv) Shared power to dispose or direct the disposition of:             396,330

The General Partner, Investment Manager, IMGP and Mr. Bommer:
-------------------------------------------------------------

(i) Sole power to vote or direct the vote:                                   0
(ii) Shared power to vote or direct the vote:                        1,373,565
(iii) Sole power to dispose or direct the disposition of:                    0
(iv) Shared power to dispose or direct the disposition of:           1,373,565





                                                            Page 12 of 14 Pages


Item 5.         Ownership of Five Percent or Less of a Class:

                If this statement is being filed to report the fact that as of
                the date  hereof  the  reporting  person  has ceased to be the
                beneficial  owner of more  than five  percent  of the class of
                securities, check the following |X|.


Item 6.         Ownership  of More than  Five  Percent  on  Behalf of  Another
                Person:

                This Item 6 is not applicable.

Item 7.         Identification  and  Classification  of the  Subsidiary  Which
                Acquired the Security  Being Reported on By the Parent Holding
                Company:

                This Item 7 is not applicable

Item 8.         Identification and Classification of Members of the Group:

                See disclosure in Item 2 hereof.

Item 9.         Notice of Dissolution of Group:

                This Item 9 is not applicable.

Item 10.        Certification:


                 By signing  below  each of the  Reporting  Persons  certifies
that, to the best of their  knowledge and belief,  the securities  referred to
above were not acquired and are not held for the purpose of or with the effect
of changing or  influencing  the control of the issuer of the  securities  and
were not acquired and are not held in connection  with or as a participant  in
any transaction having that purpose or effect.






                                                            Page 13 of 14 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.

Date: February 14, 2008

                                    /s/ Michael Casey
                                    -----------------------------------------
                                    Michael Casey, attorney-in-fact for Scott
                                    A. Bommer, individually and (a) as
                                    managing member of SAB Capital Advisors,
                                    L.L.C., for itself and as the general
                                    partner of (i) SAB Capital Partners, L.P.;
                                    and (ii) SAB Capital Partners II, L.P.;
                                    and (iii) SAB Overseas Master Fund, L.P.;
                                    and (b) as managing member of SAB Capital
                                    Management, L.L.C., for itself and as the
                                    general partner of SAB Capital Management,
                                    L.P.






                                                            Page 14 of 14 Pages


                                   EXHIBIT 1

                               POWER OF ATTORNEY

         KNOW ALL MEN BY THESE PRESENT,  that I, Scott A. Bommer, hereby make,
constitute and appoint each of Michael Casey, Brian Jackelow and Alessandro De
Giorgis, acting individually, as my agent and attorney-in-fact for the purpose
of executing in my name, (a) in my personal  capacity or (b) in my capacity as
managing member of or in other capacities with SAB Capital Advisors, L.L.C., a
Delaware  limited  liability  company,  and each of its affiliates or entities
advised or controlled by me or SAB Capital  Advisors,  L.L.C.,  all documents,
certificates, instruments, statements, filings and agreements ("documents") to
be  filed  with or  delivered  to any  foreign  or  domestic  governmental  or
regulatory  body or  required  or  requested  by any  other  person  or entity
pursuant to any legal or regulatory  requirement  relating to the acquisition,
ownership, management or disposition of securities, futures contracts or other
investments, and any other documents relating or ancillary thereto, including,
without  limitation,  all documents relating to filings with the United States
Securities and Exchange  Commission (the "SEC") pursuant to the Securities Act
of 1933, as amended,  or the Securities  Exchange Act of 1934, as amended (the
"Act"),  and the  rules and  regulations  promulgated  thereunder,  including,
without limitation:  (1) all documents relating to the beneficial ownership of
securities  required  to be filed with the SEC  pursuant  to Section  13(d) or
Section 16(a) of the Act, including,  without limitation:  (a) any acquisition
statements on Schedule 13D or Schedule 13G and any amendments thereto, (b) any
joint  filing  agreements  pursuant  to Rule  13d-1(k),  and  (c) any  initial
statements of, or statements of changes in, beneficial ownership of securities
on Form 3,  Form 4 or Form 5 and (2) any  information  statements  on Form 13F
required to be filed with the SEC pursuant to Section 13(f) of the Act.

         All  past  acts of  these  attorneys-in-fact  in  furtherance  of the
foregoing are hereby ratified and confirmed.

         This Power of  Attorney  shall  remain in effect  until  revoked,  in
writing, by the undersigned.

         IN  WITNESS  WHEREOF,  the  undersigned  has  executed  this Power of
Attorney, this 9th day of August 2006.


                                      /s/ Scott A. Bommer
                                      -------------------------------
                                      Scott A. Bommer