How does unitranche debt work?

Unitranche debt or financing represents a hybrid loan structure that combines senior debt and subordinated debt into one loan, allowing banks to compete better against private debt funds. Unitranche debt is typically used in institutional funding deals.

What is the difference between unitranche and stretch senior?

RC: Senior stretch deals are defined as “in between senior and unitranche leverage”- oftentimes a half-turn or three-quarters of a turn below where a total debt multiple would be on a unitranche.

What is a unitranche term loan?

Unitranche is a flexible form of financing often used by mid-sized companies to help fund acquisitions or ownership transitions. It combines different types of secured and unsecured debt in a single loan with a blended interest rate and a predictable repayment schedule that gives a business maximum flexibility.

Is unitranche senior?

What is a unitranche facility? Typically, a unitranche facility is a single tranche term loan with a blended senior/junior interest rate. It is usually documented in a single loan agreement.

What is senior debt and junior debt?

Senior debt is repaid first if the borrower encounters a default or liquidation. It is usually secured debt with collateral; however, it can also be unsecured with specific provisions for repayment seniority. Generally, junior debt and subordinated debt is unsecured debt that is not backed by collateral.

Does unitranche amortize?

Although unitranche products have several different forms, the primary characteristics are twofold: 1) no meaningful amortization, and 2) higher rates— approximately 10\%—for lower middle market companies.

What is senior stretch debt?

Key Takeaways. Senior stretch loans are hybrid loans used by middle-market firms to fund leveraged buyouts (LBOs). These loans combine senior and junior debt into a single package and are named as such because they “stretch” to accommodate the borrower’s financing needs.

What is stretch debt?

A stretch loan is a form of financing for an individual or business that can be used to cover a short-term gap. In effect, the loan “stretches” over that gap, so that the borrower can meet financial obligations until more money comes in and the loan can be repaid.

What is the difference between senior and mezzanine debt?

Mezzanine debt is a hybrid form of capital that is part loan and part investment. Senior debt is a loan from a bank. Banks lend off of asset values so most senior loans are collateralized with assets. The bank loan is always secured and in the first position.

What is the difference between senior debt and subordinated debt?

Senior debt has the highest priority and, therefore, the lowest risk. Thus, this type of debt typically carries or offers lower interest rates. Meanwhile, subordinated debt carries higher interest rates given its lower priority during payback. Subordinated debt is any debt that falls under, or behind, senior debt.

What is senior debt and subordinated debt?

What is mezzanine financing?

Mezzanine financing is a hybrid of debt and equity financing that gives the lender the right to convert to an equity interest in the company in case of default, generally, after venture capital companies and other senior lenders are paid.