A unitranche facility blends what would otherwise be separate senior and subordinated debt into a single loan, from a single lender, at one blended interest rate and under one set of covenants.
The structure is best understood against what it replaces. Illustrative Canadian mid-market deals otherwise layer two separate lenders: a senior lender advancing roughly 3.0× EBITDA, and a mezzanine lender adding about another 1.0× EBITDA at 8–12%, often with a paid-in-kind component (deavo.ai/financing). A unitranche facility replaces that two-lender, two-agreement stack with a single credit agreement covering the combined leverage — the borrower negotiates one facility instead of a senior loan plus a separate subordination agreement between two different lenders.
Security is still typically taken the way a senior term loan’s would be — through a general security agreement registered under the relevant province’s Personal Property Security Act (treadstonelaw.ca) — the difference is that only one lender is registering against the collateral, not two. Private credit funds active in the Canadian upper mid-market increasingly offer this structure; because the single lender is absorbing both the senior and the subordinated risk in one position, unitranche pricing sits at a premium to what a blended senior-plus-mezzanine stack would otherwise cost. No Canadian lender publishes a standard unitranche rate, so treat any figure quoted on a specific deal as that deal’s own negotiated pricing, not a market benchmark.
Instead of splitting $16,000,000 of debt (4.0× a $4,000,000 EBITDA base) between a senior lender at 3.0× and a mezzanine fund at 1.0×, a single private credit lender advances the full $16,000,000 in one unitranche facility, with one credit agreement, one covenant package, and one blended rate that sits between what the senior tranche and the mezzanine tranche would separately have cost — and no subordination agreement to negotiate between two lenders, because there is only one.
See also: Senior secured term loan · Mezzanine debt · Leveraged buyout.
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