Unitranche
Definition
A unitranche is a single blended debt facility — typically provided by private credit / direct lenders — that combines what would traditionally be separate senior and junior tranches into one instrument with one blended interest rate and one set of documents.
It is a staple of middle-market LBO financing: one lender (or a small club) provides the whole debt quantum, offering speed, certainty, and confidentiality versus a syndicated process, usually at a higher blended cost than broadly syndicated senior debt.
Behind the scenes, unitranche lenders sometimes split economics via an agreement among lenders (AAL) into "first-out" and "last-out" pieces with different effective returns — invisible to the borrower but important in a workout. The rise of unitranche tracks the broader growth of private credit taking share from banks.
Why interviewers ask
With private credit's explosive growth, interviewers increasingly ask how direct lending differs from syndicated leveraged finance — unitranche is the concrete product answer. It also appears in questions about why sponsors chose private credit for a given deal.
Related terms
Interviews don't test definitions — they test recall under pressure.
Drill 1,500+ real questions with spaced repetition. Free to start — 10 reps a day on the house.