What is a unitranche loan?

Lenders in a unitranche often split the loan into a first-out and a last-out piece through an agreement among lenders, which sets who is repaid first after a default. Documentation is a single credit agreement. It is typically used in sponsor-backed buyouts and add-on acquisitions. It is often confused with mezzanine, which sits below senior debt as a separate instrument.

Say a company needs $200 million. One direct lender provides it all as a unitranche at a blended rate, instead of separate senior and junior loans from different lenders.

It makes borrowing quicker and simpler for a company, and is a staple of private credit.