Agreements Among Lenders in Unitranche Lending: Structural Issues and Current Trends

Recording of a 90-minute CLE webinar with Q&A

Conducted on Tuesday, December 3, 2013

Recorded event now available

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Program Materials

This CLE webinar will discuss the structure of unitranche loan facilities, the differences between unitranche loan facilities and first/second lien facilities and senior/mezz facilities, certain trends in the unitranche loan facility “market”, and certain potential issues associated with AALs.

Description

The unitranche loan facility is used largely in middle market lending transactions and differs from first/second lien facilities and senior/mezz facilities as it is provided under a single credit agreement, has a single set of security documents, and is administered by a single agent for the lenders.

The document binding the lenders is the AAL, which unlike an intercreditor agreement, does not include the borrower as a party and which the borrower rarely sees. The unique structure of the unitranche facility and the AAL raises issues that a lender’s counsel must understand when involved in these types of transactions.

Moreover, there is very little case law involving AALs. While recent case law involving intercreditor agreements may be instructive in interpreting enforcement of AALs, the structural differences between the two loan facilities may lead to a different result.

Listen as our authoritative panel discusses the structure of unitranche loan facilities, the differences between unitranche loan facilities and first/second lien facilities and senior/mezz facilities, certain trends in the unitranche loan facility “market”, and certain potential issues associated with AALs.

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Outline

  1. Structure of unitranche facilities and comparison to first/second lien facilities
    1. Terms of the AAL
    2. Blended interest rate
    3. Payment waterfall
    4. Voting rights modified by the AAL
    5. Ability of last-out lender to direct enforcement actions and the agent
  2. Enforcement of AALs in event of default or bankruptcy
    1. Ability of lenders to object as unsecured creditors
    2. Entitlement of lenders to adequate protection/post-petition interest
    3. Pitfalls for last-out lenders in classification disputes

Benefits

The panel will review these and other key questions:

  • What rights do last-out lenders have to take direct enforcement action in the event of loan default, both pre- and post-bankruptcy?
  • Can a first-out or last-out lender object to actions of the lending agent as an unsecured creditor?
  • Are first- or last-out lenders entitled to adequate protection/post-petition interest?
  • Are last-out lenders disadvantaged in classification disputes?

Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.

Faculty

Jennifer B. Hildebrandt
Jennifer B. Hildebrandt
Of Counsel
Paul Hastings

Ms. Hildebrandt represents banks, commercial finance companies, hedge funds, and other lenders in commercial and...  |  Read More

Yount, Jennifer
Jennifer St. John Yount
Partner, Corporate Department
Paul Hastings

Ms. Yount’s practice consists of representing banks, finance companies, and other lenders in working capital...  |  Read More

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