Intercreditor issues on European unitranche deals
Produced by Susan Whitehead of Hogan Lovells
Intercreditor issues on European unitranche deals

The following Banking & Finance practice note Produced by Susan Whitehead of Hogan Lovells provides comprehensive and up to date legal information covering:

  • Intercreditor issues on European unitranche deals
  • What are unitranche deal structures?
  • A question of the balance of power
  • FO/LO facilities
  • Voting
  • Hedging
  • Prepayments
  • Enforcement rights
  • Intercreditor issues are key

The European leveraged finance loans market prides itself on innovation and its ability to adapt quickly and develop products to cater for current economic conditions. Unitranche facilities have become a firm feature of the leveraged loans mid-market over the last decade. Their growth in popularity has been in part due to the proliferation of private debt funds entering the market since the last financial crisis and also a reaction to the current constraints on the amount of leverage which regulated banks can provide for individual transactions.

Unitranche facilities are usually provided by one lender, or on larger deals by a small club of lenders, and are not intended to be syndicated.

There are a number of intercreditor issues thrown up by the nature of these transactions which need careful consideration by the parties.

What are unitranche deal structures?

Put simply, a unitranche is designed to replace the need for separate senior and subordinated facilities (such as a mezzanine loan or a second lien loan) with a single facility which will carry a single blended margin. Traditional banks are often not able or willing to lend the leverage multiples this entails whereas debt funds generally can do so.

The unitranche facility (which may, in fact, be divided into two or more different tranches if the deal structure so requires) will typically not amortise during its life in contrast to the

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