The pricing squeeze
The blended spreads on unitranche loans have become tighter too. From 2014-16, the spread for unitranche loans was more than 6.8 percent, according to data from the firm’s fourth-quarter Middle Market Lender Outlook survey. In 2017, that figure dropped by 20 basis points to 6.6 percent. In 2018, it fell to under 6 percent.
In fact, the level of recovery, at least for bifurcated unitranche loans, may depend on a largely unknown factor: the agreement among lenders provision. This bifurcates the loans into a first out/last out structure and governs things like interest rates and payment waterfalls.
But while AALs may bring uncertainty, the rise of unitranche is not in question.