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.
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.
| Metric | Unitranche | Senior Term Loan | Standalone Mezzanine |
|---|---|---|---|
| Spread (SOFR +) | 475–575 bp | 325–400 bp | 900–1 100 bp (cash + PIK) |
| Up-front fee | 1.5–2.0 % | 1.0–1.5 % | 2.0–2.5 % |
| Typical LTV | 55–65 % | 40–50 % | 10–15 % incremental |
| Equity warrants | None | None | 5–15 % IRR kicker common |
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.
| Step | Unitranche (days) | Senior-Mezz (days) |
|---|---|---|
| Indicative term sheet | 3–5 | 5–7 |
| Credit memo & IC vote | 10–14 | 14–21 |
| Legal docs agreed | 15–20 | 20–30 |
| Funding | 5–6 | 8–12 |
| Total | ≈ 45 | ≈ 70 |
Our debt-advisory desk benchmarks coupons in real time across more than forty direct-lending platforms. We:
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.
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.
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