Unitranche facility
Last updated
Quick Answer
A unitranche is a single credit facility at one blended rate that the lenders internally divide into a first-out and a last-out tranche.1,2
What it is
The borrower signs one credit agreement, deals with one agent, and pays one rate. Behind it, an Agreement Among Lenders splits the economics: the first-out tranche takes a lower return and priority in a waterfall, the last-out takes a higher return and the risk. More recent structures replace the split entirely with a single unitranche lender plus a separate super-priority revolver.1,2
Operational context
What good looks like
Why It Matters
It is the dominant middle-market structure and the reason a borrower can get senior and junior economics without negotiating two facilities. The trade is speed and simplicity against a blended rate above pure senior pricing, and a lender group whose internal fight the borrower cannot see or influence.1
Term Family
Related concepts
Related Questions
Is the borrower a party to the AAL?
Typically no — the borrower is usually not a party to the Agreement Among Lenders.
What's the difference between an AAL and an intercreditor agreement?
An intercreditor agreement governs relations between separate facilities with different lien or payment priorities; an AAL governs relations inside a single unitranche facility that the borrower experiences as one loan.
Frequently Asked Questions
What is Unitranche facility in venture capital?
The borrower signs one credit agreement, deals with one agent, and pays one rate. Behind it, an Agreement Among Lenders splits the economics: the first-out tranche takes a lower return and priority in a waterfall, the last-out takes a higher return and the risk.
Why is Unitranche facility important for startups?
Understanding Unitranche facility is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Sources & References
- 1.T3-05 — Mayer BrownAgreements Among Lenders and Unitranche Facilities — a Fresh Look at a Trending Product (Nov 2023)Mayer Brown(A unitranche is a single credit facility at one blended rate that the lenders internally divide into a first-out and a last-out tranche.)secondary · T3 · debt-capital-structure · instrument
- 2.T3-07 — Proskauer RosePrivate Credit Restructuring Trends: No AAL, No Problem?Proskauer Rose(A unitranche is a single credit facility at one blended rate that the lenders internally divide into a first-out and a last-out tranche.)secondary · T3 · debt-capital-structure · instrument
- 3.T3-08 — Baker DonelsonUnitranche Debt Structures: Practical Insights for Borrowers and LendersBaker Donelson(A unitranche is a single credit facility at one blended rate that the lenders internally divide into a first-out and a last-out tranche.)secondary · T3 · debt-capital-structure · instrument
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