Unitranche Financing for Middle Markets: Loan Facility Structure and Market Trends for Borrowers and Lenders

Structuring Agreements Among Lenders, Maximizing Recovery for First-Out and Last-Out Lenders in Event of Default

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


Conducted on Thursday, June 12, 2014

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, current trends in the unitranche loan facility “market,” and potential enforcement issues with (AALs) after a default or bankruptcy.

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, usually 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 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 of finance practitioners analyzes 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 potential enforcement 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 are current trends in unitranche lending and how are these facilities structured?
  • How do unitranche facilities differ from first/second lien facilities and senior/mezz facilities?
  • 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?

Faculty

Hildebrandt, Jennifer
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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