What is the difference of Private Debt Facilities (Unitranche/Stretched Senior) vs. standard TLBs in LBOs?
Hey guys,
I'm getting more interest in the private debt market but have some concept issues with the used facilities (Unitranche & Stretched Senior).
I would really appreciate if someone could help me out here as I try to prepare for intern interviews.
I'll give you an example to illustrate what parts I dont understand, normal mid-cap LBO with 4.0x leverage, USD 60mn debt package requested.
As example, the PE could have one of the following choices:
- going the bank route and maybe lands a club deal with 3 parties, everyone providing a USD 20mn TLB
- going the private debt route and gets offered a USD 60mn Unitranche or USD 60mn Stretched Senior
My issues is here, from my understanding Unitranche combines senior and suborindated debt, but if the debt fund is the only debt provider, to whom will the Unitranche be subordinated? Isn't it in this instance not the same as a TLB? And how differentiates the Stretched Senior vs. the Unitranche in a transaction with a single debt provider?
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