Unitranche financing

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Unitranche or unitranche financing describes the combination of debt components that are senior and subordinate and are presented in a single financing instrument.

description

In the unitranche form of financing, the lender provides the borrower with senior debt ( outside capital ) and junior debt ( equity / subordinated capital ) in one financing tranche. Unitranche financings are for the most part issued by loan funds specializing in financing (debt funds) with an averaged interest rate and can be in the form of loans or bonds . For regulatory reasons, Unitranche financings in Germany are mostly issued as bonds. If the unitranche is issued directly by a single loan fund, no other legal documents are required in addition to the bond documentation or loan documentation. If a Unitranche financing is structured, for example due to a high volume, through several loan funds or through a loan fund together with a credit institution as a consortium in which the parties with different risk and margin profiles evaluate this Unitranche transaction, an Agreement Among Lenders (AAL) is required .

meaning

As renowned commercial law firms have shown, Unitranche financings have become more popular in Europe. Unitranche financings are particularly popular for acquisition financings and buyout transactions due to the higher possible leverage . But the importance of unitranche financing is also growing in refinancing and recapitalization. In 2014 alone, the number of financings almost tripled compared to unknown. With 111 Unitranche transactions in 2015 (+61 percent in Europe), this confirms the company's successful Unitranche financing trend. Not only the transaction volume and the number of transactions confirm the strong trend in Unitranche financing in Europe, but also the significant increase in loan funds that issue Unitranche financings. More than 65 loan funds in Europe can currently issue Unitranche financing. The volume of the loan funds is also increasing in line with the Unitranche transactions and to date has often reached billions of euros. The reasons for the success of the Unitranche resulted mainly from the selective lending by banks in Europe due to the increased capital requirements under Basel III and the lack of alternative forms of financing for companies. Furthermore, borrowers can benefit from the more flexible loan funds compared to typical credit institutions, as reporting and covenants are often less pronounced.

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