Definition of unitranche

A unitranche is a type of credit facility or loan that is becoming increasingly popular in circumstances where borrowers would otherwise have had to separately negotiate first lien and second lien loans (guaranteed by assets and demanding different interest rate repayments) or senior and mezzanine credit facilities. Unitranches are provided under a single set of loan documents administered by one agent for the lenders. Lenders separately agree among themselves "first out" and "last out" tranches which include provisions in the event of a default. The credit agreement in a unitranche usually provides one blended pricing to the borrower, however, which falls between the rate charged by the first-out lender and the last-out lender. Significantly, unlike in first and second lien, or senior/mezzanine debt credit facilities, the borrower makes only one agreement which could put question marks over borrowers' obligations to individual lenders in the event of bankruptcy.

 

unitranche in the news

In January 2014, it was announced that Barclays had joined forces with BlueBay Asset Management to offer unitranche debt to UK companies. While the borrower would see one loan and one rate, it was revealed that Barclays would be reimbursed first if the company became insolvent and that BlueBay would fund the riskier part of the loan but get a bigger share of the profit.

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