The recent frothiness of the credit markets has been accompanied by re-emergence of the so-called unitranche credit facility. This is not surprising given the continuing quest of borrowers in the middle-market space, particularly those with private equity sponsors, for flexibility and simplicity in loan structures.
Unitranche credit facilities arrived on the scene approximately a decade ago. The defining characteristic of a unitranche credit facility is a single credit agreement among the borrower and its senior and mezzanine/junior lenders, with intercreditor arrangements addressed in a separate agreement to which the borrower is not a party. These loan structures are favored by borrowers because, with one credit agreement, they are, at least in theory if not in practice, more easily assembled and closed than a typical first/second debt or lien financing arrangement, thereby reducing the time and cost burdens on a borrower.
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