Unitranche is a flexible form of financing often used by mid-sized companies to help fund acquisitions or ownership transitions. It combines different types of secured and unsecured debt in a single loan with a blended interest rate and a predictable repayment schedule that gives a business maximum flexibility.
Furthermore, are bonds senior debt?
Loans and bonds can be issued as senior debt or subordinated debt. Senior debt is repaid first if the borrower encounters a default or liquidation. It is usually secured debt with collateral; however, it can also be unsecured with specific provisions for repayment seniority.
Keeping this in view, does unitranche amortize?
Although unitranche products have several different forms, the primary characteristics are twofold: 1) no meaningful amortization, and 2) higher rates— approximately 10%—for lower middle market companies.
How do delayed draw term loans work?
A delayed draw term loan (DDTL) is a special feature in a term loan that lets a borrower withdraw predefined amounts of a total pre-approved loan amount. The withdrawal periods—such as every three, six, or nine months—are also determined in advance.
How does a unitranche work?
A Unitranche Debt is a hybrid loan structure that combines senior and subordinated debt. … In the event of a liquidation, senior debt is paid out first into one debt instrument. The borrower of this type of loan pays a blended interest rate that falls between the rate of the senior debt and subordinated debt.
Is unitranche senior?
Typically, a unitranche facility is a single tranche term loan with a blended senior/junior interest rate. It is usually documented in a single loan agreement.
What are the types of syndicated loans?
Basics of Syndicated loan
- Term Loan– It is a loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate. …
- Revolving Loan– In this facility the borrower decides how often they want to withdraw and in what time intervals.
What is a syndicated term loan?
A syndicated loan is a loan extended by a group of financial institutions (a loan syndicate) to a single borrower. Syndicates often include both banks and non-bank financial institutions, such as collateralized loan obligation structures (CLOs), insurance companies, pension funds, or mutual funds.
What is senior debt and subordinated debt?
Senior debt has the highest priority and, therefore, the lowest risk. Thus, this type of debt typically carries or offers lower interest rates. Meanwhile, subordinated debt carries higher interest rates given its lower priority during payback. … Subordinated debt is any debt that falls under, or behind, senior debt.
What is senior debt financing?
Senior debt is borrowed money that a company must repay first if it goes out of business. Each type of financing has a different priority level in being repaid if the company goes out of business.
What is the difference between first lien and second lien?
Second-lien debt is borrowing that occurs after a first lien is already in place. It subsequently refers to the ranking of the debt in the event of a bankruptcy and liquidation as coming after first-lien debt is fully repaid. … These debts have a lower priority of repayment than do other, senior, or higher-ranked debt.
What is the difference between term loan A and term loan B?
Term Loan A – This layer of debt is typically amortized evenly over 5 to 7 years. Term Loan B – This layer of debt usually involves nominal amortization (repayment) over 5 to 8 years, with a large bullet payment in the last year. … Depending on the credit terms, bank debt may or may not be repaid early without penalty.
Why are loans syndicated?
Syndicated loans arise when a project requires too large a loan for a single lender or when a project needs a specialized lender with expertise in a specific asset class. Syndicating the loan allows lenders to spread risk and take part in financial opportunities that may be too large for their individual capital base.
Why do loans get syndicated?
Loan syndication most often occurs when a borrower requires an amount too large for a single lender to provide or when the loan is outside the scope of a lender’s risk exposure levels. Thus, multiple lenders form a syndicate to provide the borrower with the requested capital.