This week we wrap up our unitranche series by asking the $64,000 question that always surfaces in discussions about the future of the unitranche: How will it fare in bankruptcy? With providers that do not bifurcate the unitranche between first-out and second-out lenders, there are no intercreditor issues to consider. But for those that do,…
There are two kinds of unitranche providers. Both provide the entire financing to the borrower at a given spread in one debt tranche. But one type bifurcates the tranche into first-out and last-out term loans to different lenders. The other doesn’t. As we’ve discussed in previous instalments of our unitranche series, one-stop structures are becoming…
So far in our unitranche series we’ve examined the structural variations of this increasingly popular financing tool for leveraged lenders and sponsors. This week we look behind the curtain at the dynamics between lenders in the unitranche itself. For some unitranche options, one debt provider alone mimics the leverage that would be offered by both…
A senior risk officer we know read with interest the first of our multi-part series on the unitranche product [link]. “What’s interesting is how quickly these one-stop financings have become the product of choice for borrowers,” he told us. “The unitranche is a real paradigm shift for borrowers and lenders, thanks to its ease of…
As with all great capital market innovations – price flex, CLOs, and second-lien term loans – the unitranche seems obvious in hindsight. Having one lender provide a senior secured tranche that mimics a combined senior and subordinated debt structure solves a number of borrower issues. Yet its development was hardly a foregone conclusion. A decade ago the…
With the passing of Yogi Berra, the position of sports legend/philosopher is now vacant. While no obvious candidates have stepped forward, we offer to nominate Cam Newton, star quarterback of the Carolina Panthers. Second-guessed on a play call by a reporter at a press conference last October, he replied with a shrug, “Hindsight is always…
In the classic 1962 film, “Lawrence of Arabia,” two British officers watch the unfolding chaos as Arab tribes vie for control of Damascus. Eager to keep events from spiraling out of control, the colonel pleads with his commanding officer, “We can’t just do nothing.” The general, savvy to the political reality, replies calmly, “Why not?…
Leveraged loans occupy a unique position in the credit asset class. Like high-yield bonds they boast an active secondary market, but unlike junk they reside at the top of the capital structure. Also, like high-yield, these loans are extended to non-investment grade issuers so enjoy higher returns than their investment grade cousins. But unlike bonds,…
According to Merriam-Webster, the word “volatility” comes from the Latin, volātilis, meaning flying. Any investor who has remotely been paying attention to market events over the past several weeks can appreciate that etymological derivation. Even this community grown accustomed to wild swings of value over the past seven years was taken aback by the gyrations…
With the unofficial end of summer almost upon us, we thought it would be appropriate to take a look at what’s in store for the loan markets in September. First, let’s examine total deal volume. Thomson Reuters LPC reports that year-to-date middle market LBO activity is on track relative to last year: $10.7 billion vs….