Unitranche financing—an introduction
Produced in partnership with Lee Federman

The following Banking & Finance practice note produced in partnership with Lee Federman provides comprehensive and up to date legal information covering:

  • Unitranche financing—an introduction
  • What is a unitranche facility?
  • Advantages and disadvantages for borrowers
  • Advantages for borrowers
  • Disadvantages for borrowers
  • Key characteristics of unitranche facilities
  • First loss/second loss facilities
  • Intercreditor agreement
  • Agreements Among Lenders

Unitranche financing—an introduction

Unitranche facilities have become one of the main financing options available to both financial sponsor-backed and non sponsor-backed borrowers in the European leveraged loan market. These financings originally became popular in the US mid-market in 2005 and since 2012 have their share of the European mid-market year on year.

This Practice Note explains what unitranche facilities are, outlines the advantages and disadvantages to borrowers, and explains in detail their key characteristics.

See Practice Note: Acquisition finance—introductory guide for more general introductory information on acquisition and leveraged finance. For an explanation of some of the terms used in this Practice Note, see: Glossary of acquisition finance terms and jargon.

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.

Unitranche facilities are generally provided by non-traditional lending entities ie private debt funds and other alternate credit providers, and are provided in amounts ranging from between €10m right up to €2bn. At the larger end of the scale, debt funds regularly compete against the high yield and European Term Loan B markets for the most high profile and complex transactions, including large public to private financings.

On a typical unitranche financing, a debt fund will pair up with a commercial bank which will provide the borrower with a revolving

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