Love of the unitranche loan will stay strong in 2016, as private equity firms and other dealmakers value the structure’s ease of use and ability to help close deals more quickly than syndicated facilities. Closing deals quickly will be especially important in the hyper-competitive, high-multiple deal landscape expected in 2016. For more, see Unitranche Loans Charm PE Firms.
“Buyers want to close quickly, and that is a differentiator for them in a sale process,” David Brackett, CEO of Antares Capital, told Mergers & Acquisitions. Under the GE Capital umbrella, Antares made primarily unitranche loans to private equity-backed companies, but after the August sale to Canada Pension Plan Investment Board, Antares plans to expand to second-lien debt.
“A lot of private equity buyout deals are unitranche now,” says Tom Lesch, head of Livingstone Partners’ debt advisory practice. PE firms can often close deals more quickly when they use the structure, because fewer groups are involved and the documentation is simpler.
Aside from ease of use, the unitranche loan often carries blended amortization that comes out to less than that of a first-lien and second-lien combination, according to Golub Capital CEO Lawrence Golub. No wonder the structure’s popularity is expected to last.