Unitranche debt is a hybrid financing instrument that combines senior debt and mezzanine debt into a single tranche, raised from a single lender — typically a private debt fund. It significantly simplifies the documentation and governance of acquisition financing by eliminating the need to coordinate multiple creditors with different priorities, while offering equivalent financing capacity to a two-tier structure.

‍

The unitranche rate is typically 6–10% all-in (cash + PIK), positioning its cost between senior debt (SARON + 2.5–3.5%) and traditional mezzanine (8–12%). The lending private debt fund receives simplified documentation and covenants negotiated directly with it — without an intercreditor agreement between senior and mezzanine lenders.

‍

Unitranche debt is particularly suited to financial structuring transactions in the CHF 15–80 million mid-market range, where the legal and organisational complexity of a two-tier structure is not economically justified. It is also favoured in speed-of-execution situations (competitive processes, urgent transactions) where lender responsiveness is a decisive advantage.

‍

Example: a private debt fund finances a CHF 20.0 million LBO with a unitranche of CHF 12.0 million (60%) at 7.5% all-in (6% cash + 1.5% PIK), repayable over 6 years bullet with a maximum leverage covenant of 5.5x EBITDA. Documentation is finalised in 4 weeks — twice as fast as a classic senior + mezzanine structure with intercreditor.

‍

At Hectelion, we advise clients on the choice between classic senior/mezzanine structures and unitranche, integrating Swiss tax constraints and 2025 market conditions.