Structure
Unitranche
Unitranche is a single blended facility from one fund, replacing the senior and junior layers a bank structure would use. It buys leverage, speed and a bullet repayment, and it charges for all three.
Also called unitranche facility · direct lending facility · single-tranche debt · private credit facility · cost of private credit · private credit pricing UK
Fund capital prices materially wider than bank senior. The gap is the price of leverage, speed and a bullet.
| Instrument | Margin over SONIA |
|---|---|
| Bank senior | Low single digits |
| Unitranche | 550-800bps |
Source: the unitranche guide: bank senior at low single digits over SONIA, unitranche at SONIA + 550 to 800bps.
What the structure replaces
A traditional leveraged structure layers debt: a senior term loan from a bank, sometimes a second tranche, occasionally mezzanine behind it, each with its own lender, its own document and its own economics, held together by an intercreditor agreement.
Unitranche collapses that into one facility from one fund at a single blended rate. One lender, one document, one conversation. The blend sits between where the senior layer and the junior layer would each have priced, which is why it looks expensive against senior alone and cheaper than a senior-plus-mezzanine stack.
That simplification is a large part of what a borrower is buying. Negotiating with one credit committee rather than three, and with no intercreditor to agree between lenders who do not otherwise need to speak, removes weeks from a transaction.
What it costs
Unitranche prices at SONIA plus 550 to 800 basis points. With SONIA at 3.73%, that gives an all-in cost of roughly 9.25% to 11.75% including margin and before fees.
Bank senior at the same time prices at low single digits over SONIA, so the gap is substantial rather than marginal. Where a borrower sits in the unitranche range depends on leverage, sector, cash conversion and the quality of the credit; the keenest credits sit near the bottom, and the range widens as leverage rises.
Those figures are before fees, and the fee stack is heavier on a fund deal too: an arrangement fee at 1.5% to 3% rather than the 1% of a bank deal, frequently original issue discount funding you at 98 to 99, and usually call protection on an early exit. An honest comparison counts all of it over the period you expect to hold the facility.
The all-in number is just the reference rate plus the margin. At SONIA 3.73% the range lands at 9.25% to 11.75%.
| Component | Rate |
|---|---|
| SONIA | 3.73% |
| At +550bps | 9.23% |
| At +800bps | 11.73% |
SONIA 3.73% (2 Jul 2026) and a margin of 550-800bps give an all-in band of ≈9.25-11.75%, before fees.
The leverage it reaches
The clearest structural difference. Bank senior leverage is commonly 2.5 to 3.5 times EBITDA. Unitranche runs nearer 4 to 4.5 times, occasionally five for a strong credit.
On a business with £2m of EBITDA, that is the difference between a facility of about £7m and one of about £9m. Where a transaction needs the higher number, the comparison is not really between two prices; it is between a deal that works and one that does not.
That is the situation in which the premium is easiest to justify, and it is worth being clear-eyed about the converse. Where the required facility sits comfortably inside bank leverage, paying fund pricing to access headroom you will not draw is a poor trade.
The bullet, and what it is worth
Bank term facilities usually amortise. Unitranche usually runs bullet, with no scheduled principal until maturity.
The cash difference is large and immediate. On a £5m facility over five years, full amortisation takes £1m of principal a year before any interest; a bullet takes none. For a business integrating an acquisition or funding a capex programme, that retained cash is frequently the point of the structure rather than an incidental feature.
It is a deferral rather than a saving. The whole principal falls due on one day, in whatever credit market exists that quarter, and interest runs on the full balance throughout. The bullet is worth paying for where the retained cash does something useful in the intervening years, and not otherwise.
The covenant package
Fund structures carry lighter covenant suites than bank facilities. Where a fully covenanted bank deal tests three or four maintenance covenants quarterly, a unitranche facility often carries a single leverage covenant, and sometimes a springing one that tests only when the revolving facility is drawn past a threshold, often around 40% of its size.
That flexibility is real and is priced into the margin. It matters most to businesses with lumpy quarterly earnings, where a fully covenanted structure produces technical breaches that require waivers and fees without anything being wrong.
It matters less than it appears in one respect: removing a maintenance covenant does not remove the lender. The protection migrates into the event-of-default and information provisions, and a fund lender reads the monthly numbers closely regardless. What changes is that a softening credit is flagged later, and a conversation that starts late tends to start from a weaker position.
The premium buys four things. A borrower using none of them is paying for options they do not need.
| Dimension | Which wins |
|---|---|
| Headline cost | Bank senior |
| Covenant package | Fewer tests |
| Cash retained (bullet) | No amortisation |
| Speed and simplicity | One lender |
| Leverage available | 4-4.5x |
Relative advantage of a unitranche structure by dimension. Illustrative, not measured data.
Where the RCF sits
Most unitranche structures pair the term facility with a revolving credit facility for working capital, and that revolver is frequently provided by a bank rather than by the fund.
Where that happens, the bank usually takes a super senior position, ranking ahead of the unitranche on enforcement in exchange for the tighter pricing a working capital line commands. The relationship between the two is governed by an agreement among lenders, which allocates recoveries, voting rights and enforcement control between them.
For a borrower the practical effect is that a structure sold as one lender and one document often turns out to be two lenders and three documents. It is still simpler than a layered bank structure, but the intercreditor negotiation does not disappear entirely, and it can be a source of delay late in a transaction.
Speed, and why it is a real advantage
Funds move faster than banks at this size, and the reason is structural rather than cultural. A single credit committee with a mandate to deploy capital, no regulatory capital calculation, and no need to syndicate makes decisions on a shorter cycle.
That matters where a transaction has a fixed date: an acquisition with a completion deadline, a competitive process, a refinancing against a maturity. A structure that costs more but completes on time can be worth considerably more than one that is cheaper and misses.
It matters much less on an unhurried refinancing, where an extra six weeks costs nothing. The premium for speed should be paid when speed is being bought, and speed is not always being bought.
When the premium earns its keep
Unitranche runs materially wider than bank debt, and the premium only earns its keep where the leverage, the speed or the covenant flexibility is used.
The clearest cases are an acquisition that requires leverage above bank appetite, a business whose earnings volatility makes a four-covenant quarterly suite a real risk, a transaction with a completion date a bank process cannot meet, and an integration period where retained cash matters more than the margin.
The clearest case against is a stable business with modest leverage refinancing on an unhurried timetable. There, bank senior at low single digits over SONIA with an amortising profile and a full covenant suite is the cheaper answer, and the covenant suite it carries is not much of a burden for a business that will pass every test comfortably.
The comparison that decides it is total pounds over the expected holding period, counting margin, fees, discount and any exit charge, set against the value of what the fund structure provides.
Common questions
What is unitranche debt?
A single blended facility from one fund that replaces the layered senior and junior tranches a bank structure would use. One lender, one document, one blended rate sitting between where senior and junior would each have priced. It is the standard shape of UK private credit lending in the lower mid-market.
How much does unitranche cost?
The margin runs at SONIA plus 550 to 800 basis points. With SONIA at 3.73%, that is an all-in cost of roughly 9.25% to 11.75% including margin, before fees. On top sit an arrangement fee of 1.5% to 3%, often original issue discount funding you at 98 to 99, and usually call protection on an early exit.
How much leverage will a unitranche lender provide?
Commonly 4 to 4.5 times EBITDA, occasionally five for a strong credit, against 2.5 to 3.5 times for bank senior. On a business with £2m of EBITDA that is roughly £9m against £7m, which for some transactions is the difference between a deal that works and one that does not.
Is unitranche worth the extra cost?
Only where the leverage, the speed or the covenant flexibility gets used. It earns its keep on an acquisition needing leverage above bank appetite, a business with volatile quarters, or a fixed completion date a bank process cannot meet. On a stable business refinancing unhurriedly at modest leverage, bank senior is the cheaper and better answer.
Does unitranche amortise?
Usually not. It typically runs bullet, with no scheduled principal until maturity, where a bank term facility usually amortises. On £5m over five years that is the difference between £1m of principal a year and none, which is often the point of the structure. It is a deferral rather than a saving: the whole balance falls due on one day.
What covenants come with a unitranche facility?
Lighter ones. Where a fully covenanted bank deal tests three or four maintenance covenants quarterly, a unitranche facility often carries a single leverage covenant, sometimes springing only when the revolver is drawn past a threshold of around 40%. The protection does not vanish though; it migrates into the event-of-default and information provisions.
Do I still need a bank alongside a unitranche facility?
Usually for working capital. Most unitranche structures pair the term facility with a revolving credit facility, frequently provided by a bank taking a super senior position ahead of the fund on enforcement. The relationship is governed by an agreement among lenders, so a structure sold as one lender and one document is often two lenders and three documents.
Why do funds move faster than banks?
Structural reasons rather than cultural ones: a single credit committee with a mandate to deploy, no regulatory capital calculation, and no need to syndicate. That matters where a transaction has a fixed completion date, and matters very little on an unhurried refinancing where six extra weeks cost nothing.
The full treatment sits in the guide: unitranche vs bank senior.
This page explains a term as it is used in the UK lower-mid-market. It is general information, not advice on any particular facility. Terms vary between lenders and between deals, and the drafting in your own agreement governs.