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 increasingly bespoke. Depending on the issuer and the specific requirements of the transaction, these structures can include asset-based revolvers, terms loans, even mezzanine debt. The common denominator is borrowers deal with one document and one lender. What happens among the lenders is a different story.

The classic bifurcated provider was the SSLP program between GE Antares and Ares. Under that Agreement Among Lenders (AAL) GE took the first-out piece and Ares the last-out. Since the sale of GE Capital’s sponsor finance business to Canadian Pension Plan earlier this year, Ares has partnered with Varagon Capital to create a similar program. Antares Capital continues to provide unitranche financings as part of CPP.

Other middle market firms have adopted a similar partnership approach on unitranche. NewStar, for example, has teamed up with Blackstone/GSO taking the second.

The non-bifurcated strategy seems to be more common and is typified by Golub Capital. Golub lends in one strip with no first or second-out tranching.