Structuring Unitranche Facilities: Key Terms of AALs

Description

Unitranche financing combines aspects of a traditional first-lien/second-lien structure into a single credit facility with one set of loan documents, one shared lien, shared (or "blended") interest payments, and one covenant package. The unitranche structure allows lenders to tailor their intercreditor rights depending on the size of their respective first-out and last-out facilities and other deal-specific factors in an AAL.

Key deal points include tranching, payment waterfalls, interest and fee skims, voting, buyouts, remedies, and standstill and assignment provisions. Amid a fast-growing market, the LSTA has published a form AAL for general use among unitranche lenders. As an attempt at reflecting the "market" for standard agreement provisions, the LSTA form offers a good starting point for drafting and negotiating an AAL.

Open questions regarding enforcement of AALs in bankruptcy include plan classification and voting, adequate protection, and the lender's entitlement to post-petition interest. Each lender's counsel must understand the AAL issues associated with these transactions.

Listen as our authoritative panel of finance counsel guides you through the current market terms of the AAL concerning the recently released LSTA form. The panel will also look at the latest developments in the enforceability of AALs in bankruptcy and other bankruptcy-related risks.