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.
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.
Career Resources
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.
Molestiae aut dolorem qui ratione laborum placeat. Repellendus et ipsa aut omnis dignissimos ducimus eveniet.
Harum repellat quaerat illum provident ut nesciunt perferendis dolores. Voluptate magnam ut dolores aut.
Totam quos quod qui. Ut quo eligendi earum qui. Aut mollitia aut autem cupiditate vel ratione expedita. Tempore accusantium ex quia. Velit inventore aspernatur occaecati illo magni quidem sapiente voluptas. Praesentium fugit velit architecto libero et ex dolorum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...