One-Stop Debt Is Smoother, But Untested In Bankruptcy Court

Law360, New York (October 25, 2012, 5:51 PM EDT) -- Middle-market private equity buyers are turning to a hybrid loan structure that combines senior and subordinated debt, a package that promises streamlined financing and a smoother close. But these loans are still untested in bankruptcy court, and attorneys say they could hold some surprises for both borrowers and lenders if trouble hits.

These one-stop loans combine senior and subordinated slices into a single instrument, known as a unitranche loan. They use one credit agreement, one set of collateral documents and one agent for the lenders, and charge a blended interest rate in between what senior and mezzanine lenders would collect individually...

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