Unitranche vs. Senior-Mezz Stacks: Which Debt Structure Saves Sponsors Time and Dilution?

1. Executive Brief

Private-equity sponsors arranging buy-out debt usually face a binary call: one-lender unitranche or the traditional senior-plus-mezz pair. Unitranche trades a blended rate for speed and fewer documents; senior-mezz can trim the headline coupon but adds paperwork and, often, an equity kicker. The tables below give the numbers—so committees can decide before LOI deadlines tighten.

2. Structure Basics

Unitranche blends senior and junior risk into a single facility. Any first-out/last-out split happens behind the scenes; the borrower signs one credit agreement. Senior-mezz pairs a bank-style senior term loan with a mezzanine note that may carry payment-in-kind (PIK) interest or warrants.

3. Speed & Certainty of Execution

• Unitranche — one credit memo, one legal track. Median closing 45 days.
• Senior-mezz — two approval cycles plus an inter-creditor agreement. Median closing 70 days.

4. Economics: Pricing and Fees

5. Dilution Impact

Warrants on mezz notes can cost sponsors three to five percent of post-money equity. A unitranche’s higher coupon often undercuts that dilution—vital when the deal model banks on a dividend recap.

6. Covenants & Controls

• Unitranche — usually one maintenance covenant (first-lien leverage or interest cover) plus a liquidity sweep. Two equity-cure rights over the term.
• Senior-mezz — senior grid (leverage + interest cover) plus mezz junior-leverage test and dividend blockers as headroom tightens.

7. Best-Fit Borrower Profiles

• Unitranche — time-sensitive buy-outs under $1 bn EV, bolt-on plans that might stretch leverage, EBITDA add-backs that swing quarter-to-quarter.
• Senior-mezz — stable cash-flow companies chasing the lowest cash interest and owners who value a mezz lender’s board insight.

8. Closing Timelines at a Glance

9. Where Financely Group Adds Value

Our debt-advisory desk benchmarks coupons in real time across more than forty direct-lending platforms. We:

• Secure accordion and delayed-draw options inside the original facility.
• Run covenant sensitivity so equity cures never blind-side the board.
• Negotiate inter-creditor terms when mezz capital still makes sense.

Explore current mandates on Private Debt Arrangement for Sponsors , review blended-rate options under Direct Lending Solutions for Leveraged Buyouts , and compare equity-kicker mechanics in our Mezzanine Capital Advisory. For acquisition-specific models, see Business Acquisition Financing Solutions.

10. Outlook

Private-credit dry powder tops $400 bn and lenders must deploy before repayments erode fee revenue. Expect unitranche spreads to tighten by 25–50 bp if base rates ease. Senior-mezz remains viable for headline-rate optics, yet inter-creditor friction and warrant creep push many buyers toward single-lender solutions. Running both structures in parallel keeps leverage options open until the share-purchase agreement is signed.