What is Unitranche Debt?

There are different kinds of debt that a person can acquire. Senior debt, for example, is debt that takes priority over other loans. Since it has the highest priority, it is usually the lowest risk, meaning it has low interest rates. Subordinated debt, on the other hand, is any debt that falls behind senior debt. Since it is not prioritized during payback, this type of debt has higher interest rates. This then brings us to unitranche debt; unitranche debt is a hybrid loan structure that combines senior debt and subordinated debt into one loan. The borrower of this loan usually pays interest rates that are between the normal interest rates of senior debt and subordinate debt. (Related topics: unitranche CT lawyer, unitranche Connecticut attorney)

When a person has loans from different lenders, things can get complicated because each loan has its own agreement. The benefit of unitranche debt is that everything is from a single financial institution. This means that there will be flexible repayment terms, as negotiations with the lender will be simplified. This type of financing can also reduce costs of the process. This is because the administrative and transaction costs will be lower for both the borrower and the lender.

Along with the many advantages, however, there are still some factors to consider. There are some complications, for instance, when it comes to bankruptcy. The issue is that unitranche debt has not been tested in bankruptcy court; this means that there is no guarantee on how this type of debt will be handled if the borrower files for bankruptcy. As a result, the borrower may not have rulings in their favor. Additionally, these loans may increase portfolio risk and may present challenges with amending the loan agreement.

Unitranche financing offers many benefits, but not without its complications. If you are interested in getting this type of loan, you should hire a unitranche Connecticut lawyer. Unitranche Connecticut lawyers will not only help with the initial agreements, but they can also resolve any complications in the future.