Unitranche
Private Equity glossary · Advanced LBO Modeling Mechanics & Deal Structuring
Definition
Single blended debt instrument combining senior and subordinated debt at a single blended rate, typically provided by a non-bank direct lender or a small club of direct lenders. Has become the dominant middle-market deal financing product since the mid-2010s. Economics: higher all-in cost than separated first-lien + mezzanine but with operational simplicity, speed of execution, and flexibility. Pricing: typically SOFR + 550-750 bps depending on credit.
Unitranche in plain English
Normally when a company borrows to fund a buyout, it stacks up two kinds of loans: a cheaper, safer one (senior) and a pricier, riskier one (subordinated), each from different lenders with different terms — a hassle to arrange. A unitranche blends both into ONE loan at one interest rate from one lender, so the borrower deals with a single party and closes fast. You pay a bit more overall for that convenience and speed, but you skip the headache of juggling multiple lenders. It's like paying one flat monthly subscription that bundles several services together instead of managing five separate bills — slightly costlier, far simpler. Pricing typically runs a benchmark rate (SOFR) plus about 5.5 to 7.5 percentage points, depending on how risky the borrower is.
Learn these first
Related Private Equity terms
Private Equity practice questions · Private Equity flashcards · Private Equity study guide