Unitranche
Private Credit glossary · Loan Structures & Instruments
Definition
Single loan facility combining what would traditionally be separate senior secured and mezzanine tranches, provided by one direct lender (or small club). Pricing is a blended rate: r_U = w_s · r_s + w_m · r_m. Typical structure: 5.0×–6.5× total leverage, SOFR + 550–700 bps coupon. Advantages: single document, single counterparty, faster close, full workout control. Bifurcated unitranche splits the facility internally between a First-Out (bank) and Last-Out (direct lender) tranche under a confidential Agreement Among Lenders (AAL).
Unitranche in plain English
Normally a company borrowing money stacks up two separate loans: a safer "senior" loan and a riskier, pricier "mezzanine" one, each from different lenders with its own paperwork. A unitranche squishes both into a single loan from one lender, charging one blended interest rate somewhere in between. Think of buying a bundled combo meal instead of ordering the burger and fries from two different counters — one bill, one cashier, way less hassle, and you're out the door faster. The borrower loves the speed and simplicity; the lender loves having full control if the company ever runs into trouble. (Sometimes the single lender quietly splits it inside — a bank takes the safer "first-out" piece and the direct lender keeps the riskier "last-out" piece — under a private side-agreement, but the borrower still sees just one loan.)
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Practice Unitranche
If the current SOFR rate drops to 0.25%, what is the all-in interest rate the borrower must pay?
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