medium · Private Credit & Debt loan-structures-instruments
An institutional investor is offered a $150M unitranche facility at SOFR + 625 bps with a 1% floor. Alternatively, they can structure a $100M senior tranche at SOFR + 400 bps and a $50M 'last-out' junior tranche.
If the borrower requires a blended rate of 7.5% and SOFR is currently at 1%, what must the 'last-out' tranche spread be to match the unitranche's economic cost?
- 1,075 bps
- 850 bps
- 625 bps
- $1,225 bps
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