Demand for unitranche loans isn’t going away any time soon. Ease of use draws private equity firms to the structure, which combines senior and subordinated debt into one instrument and can sometimes be provided by just one lender (depending on hold size). Even though many financings are based on a floating Libor rate, they’re likely to remain popular even if and when interest rates rise.
“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.