Senior Stretch
Private Credit glossary · Private Credit Fundamentals
Definition
A senior secured loan structured beyond traditional senior leverage limits (e.g., 4.5×–5.5× Debt/EBITDA, versus the historical 3.0×–4.0× cap), priced at a blended rate to compensate for the additional risk. Functionally similar to unitranche but typically smaller and simpler — used in lower-middle-market deals where the borrower wants single-lender execution without the complexity of an AAL bifurcation.
Senior Stretch in plain English
To size a loan, lenders compare a company's total debt to its yearly earnings — a ratio written as "Debt/EBITDA," where EBITDA is roughly the cash profit the business throws off each year. Traditionally a senior lender would only lend up to about 3–4 times that yearly profit; a "senior stretch" loan pushes past that, up to roughly 4.5–5.5 times, so the lender is "stretching" to hand over more money than usual. To get paid for that extra risk, they charge a blended (averaged-out) rate a bit higher than a plain senior loan. It's a way for a smaller company to borrow more from a single lender, keeping the deal simple instead of juggling multiple lenders with a complicated agreement between them.
Practice Senior Stretch
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