What are the key modelling differences between unitranche and senior bank deal?

I was looking to get more insight into the key differences between these two structures and how to best reflected these differences in the model.

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Most Helpful
Sep 2, 2018

You should be able to model them fairly similarly. At its core, a unitranche loan is just a stretch senior loan.

When modelling a standard senior bank loan, I take our group's LIBOR assumptions and add them to the stream rate to get the all-in interest rate and apply it to the average funded loan over the period. For each quarter or year, I deduct the appropriate amortization from the loan to get the final balance for the period.

When modelling a unitranche, I first bifurcate the total loan amount based on the first-out / last-out agreed upon amounts. Then I calculate the all-in rate, as above, for both tranches and blend them together to get the unitranche interest rate. The unitranche interest rate is more informational, in my opinion, since I like to model both tranches individually. Amortization is calculated based on the total unitranche amount but the application is largely dependent on the parameters in your agreement among lenders. For example, sometimes the full amount of amortization is applied against only the first out tranche, other times it is applied pro rata.

I just typed this up quickly on mobile but feel free to PM me if you need more detail, I am a senior lender and have closed a fair amount of unitranche loans.

    • 3
Oct 11, 2018