Is a unitranche loan senior debt?

To the borrower, yes: it is a single secured loan, usually with no other loan ranking behind it in the operating group. It is often not the most senior claim, though. A super senior revolving facility commonly takes enforcement proceeds first, and where the lenders have split the loan, the last-out lenders have agreed to be repaid after the first-out lenders. A unitranche is best read as senior secured debt that may hold its own internal queue.

What does first-out, last-out mean?

It is a division of one loan between its lenders. The first-out lenders are repaid first from enforcement proceeds, and sometimes from other prepayments, in exchange for a lower margin. The last-out lenders take the first loss and a higher margin. The borrower pays the same headline margin whatever the split; the agreement among lenders reallocates interest and recoveries between the two groups.

Why is a unitranche more expensive than a bank loan?

Because it carries more debt than a bank would lend on its own, and so the lender is pricing the risk a junior lender would otherwise have taken. Its margin usually sits between bank senior and mezzanine prices. The borrower may accept that for a single negotiation, faster execution, lighter amortisation and one lender group to deal with if trading turns. Whether it is cheaper than a senior and mezzanine pair depends on the deal and the fees.

Does the borrower sign the agreement among lenders?

It depends on the deal. Some borrowers sign it, or sign an acknowledgement, particularly where the split affects voting or how payments are applied. Many agreements are private between the lenders, and the borrower knows only that a split exists, or not even that. A credit reader on the lender side reads it closely; a borrower's adviser asks whether any of its terms can change what the company is asked to do.

// WORKED EXAMPLETHE ARITHMETIC A DECISION RESTS ON

Unitranche: a Worked Example

One loan to the borrower, two queues behind the door.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-07 · 6 MIN READ

// THE SHORT ANSWER

A borrower that takes a unitranche deals with one loan: one facility agreement, one margin, one repayment date and one lender or small group of funds to call. Behind that simple face, the lenders may have agreed among themselves who is paid first if the business fails, and a bank providing the revolving facility usually ranks ahead of the whole loan on enforcement. A credit reader therefore asks two questions of every unitranche file: what the borrower owes, which is the single loan, and where each lender stands in a recovery, which may depend on a document the borrower may not have signed.

BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// MAKE THE CALL

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PART OF Corporate Lending and Credit Risk

// 01 — WHY ONE LOAN REPLACES TWO

A leveraged buyout has traditionally been financed in layers: a senior bank loan, a second-lien or mezzanine loan behind it, and an intercreditor agreement between the two lender groups that set out who could enforce, when, and who was paid first. Each layer had its own lenders, its own pricing and its own negotiation. A unitranche folds the layers into one term loan, usually provided by one or a few private credit funds, with a single margin that sits between what the layers would each have cost.

The sponsor buys speed and certainty: one credit process, one set of documents, often a longer repayment profile with little or no amortisation, and one lender group to approach for a waiver. The funds buy a larger hold at a margin above bank senior debt. The price of that simplicity is usually a higher all-in cost than a bank senior loan alone, and a concentrated lender group whose appetite for amendment can matter more than any covenant.

// 02 — THE MOVING PARTS

Three pieces recur. The unitranche term loan is the bulk of the debt, secured on the group's assets and guaranteed by its main companies. A revolving facility, typically from a bank because funds hold undrawn commitments less comfortably, sits beside it for working capital; in many deals it is super senior, meaning that enforcement proceeds go to the revolver first, while day-to-day interest and repayment rank equally. And where several funds share the term loan, an agreement among lenders can divide it into a first-out piece, repaid first from enforcement proceeds at a lower margin, and a last-out piece that waits and earns more.

Borrower pays: unitranche amount × headline margin

First-out earns: first-out amount × first-out margin

Last-out earns: (borrower pays − first-out earns) ÷ last-out amount

The borrower pays the headline margin either way. The split only reallocates the interest and the losses among the lenders. Whether the borrower is a party to the agreement among lenders, or even sees it, varies by deal, and many are private between the lenders.

// 03 — THE EXAMPLE

A sponsor-backed contract steriliser of medical devices, constructed for this page like every figure in it, earns EBITDA of US$24m. It borrows a US$120m unitranche at a margin of 6.25% from two funds, and a bank provides a US$15m super senior revolving facility. The funds agree that one takes US$40m as first-out at 4.00%, and the other takes US$80m as last-out. Every margin and amount is the example's, not a market norm.

Borrower pays: 120 × 6.25% = 7.50 a year

First-out earns: 40 × 4.00% = 1.60

Last-out earns: 7.50 − 1.60 = 5.90

Last-out margin: 5.90 ÷ 80 = 7.375%

Leverage, revolver undrawn: 120 ÷ 24 = 5.0×

Three years later a regulator suspends two of its plants, the revolver is fully drawn, and the business is sold through enforcement for US$110m after costs. Where the money goes depends on which documents exist.

Proceeds after costs 110

Super senior revolver, paid first − 15 (15 of 15, 100%)

Left for the unitranche 95

No split: 95 ÷ 120 = 79% to every fund

With split: first-out 40 of 40 = 100%

last-out 55 of 80 = 69%

The borrower owed US$135m on both versions, and the business fetched the same price. The split changed nothing for the company and a great deal for the second fund, whose recovery fell by ten points so that the first fund's rose to par. The example leaves out the claims, such as some employee entitlements, that in each market can rank ahead of a lender's security over certain assets.

DEFINED IN ONE PARAGRAPH → · BANK LOAN VS PRIVATE CREDIT → · FIRST-LIEN LEVERAGE →

// 04 — HOW IT DIFFERS FROM STRETCH SENIOR

Stretch senior is one lender lending further than it normally would against first-ranking security, at a margin above its usual senior price. A unitranche can look the same from the borrower's side, but it is a product of the leveraged market: it replaces a senior and junior structure, it is usually priced and documented for a sponsor, and it may carry a hidden ranking among its own lenders. Stretch senior has no last-out lender to absorb the first loss; in a unitranche with a split, someone has agreed to.

It also differs from a second-lien structure. A second-lien lender holds its own loan with its own terms and votes, behind the first lien on the same security. A last-out unitranche lender holds part of a single loan, and its seniority is set only by its contract with the first-out lender.

// 05 — WHERE IT DECIDES A FILE

A bank most often meets a unitranche as the revolver lender beside it. Its file reads the super senior ranking and what limits it: how large the revolver may grow, whether hedging also ranks first, and who controls enforcement. In many agreements the unitranche lenders, holding most of the debt, direct enforcement, with the revolver lender gaining control only after a period or if it is not being repaid. A revolver that ranks first but cannot act is safer on paper than in practice.

A first-out lender reads the agreement among lenders for the same reasons: voting, the last-out lender's right to buy it out, and whether the split holds in an insolvency process, a question that is less tested than ranking by security. Leverage is read on the whole loan, because the borrower defaults on the whole loan, and the first-out piece is then priced on how far down the value must fall before it is touched.

INTERCREDITOR AGREEMENT → · THE SPONSOR BEHIND THE LOAN → · MAJORITY LENDERS →

// QUESTIONS PEOPLE ASK

Is a unitranche loan senior debt?: To the borrower, yes: it is a single secured loan, usually with no other loan ranking behind it in the operating group. It is often not the most senior claim, though. A super senior revolving facility commonly takes enforcement proceeds first, and where the lenders have split the loan, the last-out lenders have agreed to be repaid after the first-out lenders. A unitranche is best read as senior secured debt that may hold its own internal queue.
What does first-out, last-out mean?: It is a division of one loan between its lenders. The first-out lenders are repaid first from enforcement proceeds, and sometimes from other prepayments, in exchange for a lower margin. The last-out lenders take the first loss and a higher margin. The borrower pays the same headline margin whatever the split; the agreement among lenders reallocates interest and recoveries between the two groups.
Why is a unitranche more expensive than a bank loan?: Because it carries more debt than a bank would lend on its own, and so the lender is pricing the risk a junior lender would otherwise have taken. Its margin usually sits between bank senior and mezzanine prices. The borrower may accept that for a single negotiation, faster execution, lighter amortisation and one lender group to deal with if trading turns. Whether it is cheaper than a senior and mezzanine pair depends on the deal and the fees.
Does the borrower sign the agreement among lenders?: It depends on the deal. Some borrowers sign it, or sign an acknowledgement, particularly where the split affects voting or how payments are applied. Many agreements are private between the lenders, and the borrower knows only that a split exists, or not even that. A credit reader on the lender side reads it closely; a borrower's adviser asks whether any of its terms can change what the company is asked to do.

// NEXT TO IT

// ON WHOSE DESK

The seats that read this term in an ordinary week. Each page says what the seat is for, who arrives in it, and the shape of the round it runs.

Business relationship managerCarries a book of trading businesses — wins them, keeps them, and is the bank's voice when the answer is no.
Credit analystReads a borrower and writes the recommendation a decision-maker will act on.
Lending operations officerTurns an approval into a working facility — documentation, security, drawdown, and the register that says what the bank actually holds.

THE IN-TRAY · ONE MINUTE

Make the call on one file.

A short file on the ground this page covers. Every option opens with how far it sits from a senior banker’s read.

THE CALL · THE LOAN · CAPACITY

A US$35m loan was sized on EBITDA of US$10m. Halfway through the year, management cuts its forecast to US$7m.

What changes?

5 MORE ON THE LOAN · CAPACITY →WHERE DO YOU READ FROM? THE PLACEMENT →

THE READING ROOMIN ONE PARAGRAPHUnitranche What is a unitranche loan, and how is it split between lenders?