Unitranche facilities have been a feature of the European and US markets for a number of years, and have recently been making their mark in Australia.
What is unitranche? A unitranche facility is a single facility which replaces the need for separate senior and mezzanine facilities and carries a blended margin. It tends to be provided by a single lender on a take-and-hold basis.
Where has it come from? Unitranche began life around 2005 in the US mid-market, and spread into Europe in the wake of the global financial crisis in 2008. European banks were forced to de-lever their balance sheets post-2008, and also saw themselves subjected to more stringent capital adequacy requirements under Basel III. Non-bank lenders, the main providers of unitranche, are outside the reach of Basel III and, having initially taken the opportunity to fill that funding gap, have since seized a large share of the European mid-market.
In this article, we provide a brief introduction to unitranche, focus on the intercreditor issues which can arise when it is combined with a revolving credit facility, and look at how unitranche is evolving in Europe and may one day develop in Australia.
Hogan Lovells and Unitranche
Hogan Lovells have been at the forefront of the development of the unitranche market in Europe since its inception in 2008 and continue to advise many of the leading direct lenders on the financing of leveraged finance transactions throughout the continent. Recent transactions include:
- advising Permira and Investec as the unitranche and super senior lenders on the refinancing of the debt facilities of the Autovista Group;
- advising Avenue Capital, Northleaf Capital and HSBC on the financing for the acquisition by Vitruvian of the aviation data services business of AXIO Aviation and OAG;
- advising Ares Management and Santander on the financing for the acquisition of Timico Techologies by Lyceum Capital;
- advising Barings on the unitranche facility to support the acquisition of Michell Instruments by Battery Ventures;
- advising Alcentra and RBS on the financing of Equistione’s acquisition of Apogee Group;
- advising Ares Management in connection with their financing of Montagu’s acquisition of Oasis Records; and
- advising CVC Credit Partners on their financing of Equistone’s acquisition of Willerby Group.
Hogan Lovells are uniquely placed to capitalise on this European experience as private debt grows in Australia, having already advised ICG on the first-ever Australian dollar denominated and Australian law governed Term Loan B facility for Iron Mountain’s acquisition of Recall Australia. The team is also currently advising the financiers on one of the first unitranche facilities to be consummated in the Australian market.