What is a unitranche structure?

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.

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Also, do unitranche loans 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.

Likewise, people ask, how does a unitranche work? A Unitranche Debt is a hybrid loan structure that combines senior and subordinated debt. … In the event of a liquidation, senior debt is paid out first into one debt instrument. The borrower of this type of loan pays a blended interest rate that falls between the rate of the senior debt and subordinated debt.

Moreover, is second lien the same as mezzanine?

Second lien loans differ from mezzanine financing, since second lien loans are lien subordinated, while mezzanine financing is debt subordinated. This means senior lien holders have priority if the borrower defaults or if the collateral for the loan is sold or claims are otherwise impaired.

Is unitranche senior?

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 a first lien last out loan?

First Lien Last Out Loan: A senior secured loan that, prior to a default or liquidation with respect to such loan, is entitled to receive payments pari passu with Senior Secured Loans of the same Obligor, but following a default or liquidation becomes fully subordinated to Senior Secured Loans of the same Obligor and …

What is a one stop loan?

A one-stop financing helps you receive a more flexible capital solution that structures your balance sheet in a way that’s most optimal for your growth and financing needs. In a one-stop, capital is packaged from across the balance sheet into a single solution from one financial partner.

What is a senior secured debt?

Senior secured loans are debt obligations generally issued by non-investment grade businesses. These loans are usually “secured” by a company’s assets, and are typically used to fund a company’s growth or cover general operating expenses.

What is a syndicated term loan?

A syndicated loan is a loan extended by a group of financial institutions (a loan syndicate) to a single borrower. Syndicates often include both banks and non-bank financial institutions, such as collateralized loan obligation structures (CLOs), insurance companies, pension funds, or mutual funds.

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.

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.

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 the difference between first lien and second lien?

Second-lien debt is borrowing that occurs after a first lien is already in place. It subsequently refers to the ranking of the debt in the event of a bankruptcy and liquidation as coming after first-lien debt is fully repaid. … These debts have a lower priority of repayment than do other, senior, or higher-ranked debt.

What is the difference between senior and subordinated notes?

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 the difference between term loan A and term loan B?

Term Loan A – This layer of debt is typically amortized evenly over 5 to 7 years. Term Loan B – This layer of debt usually involves nominal amortization (repayment) over 5 to 8 years, with a large bullet payment in the last year. … Depending on the credit terms, bank debt may or may not be repaid early without penalty.

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