“It’s all uncharted territory,” he added.

Among the biggest questions is whether bankruptcy courts even have jurisdiction over the side deals, known as an agreement among lenders. Partitioned unitranche debt is still governed by just one set of loan documents. A bankruptcy court may recognize the investors as having a single claim against the borrower, even though the private agreements often contain payment priorities and waterfall provisions.

If a court were to decide it does not have purview over a contract that doesn’t involve the debtor, that would likely force the intercreditor dispute into state or federal court, significantly delaying recovery efforts, according to Fitch.

About $4.7 billion of unitranche financings in the third quarter were for larger corporate deals. That pushed the average loan size in the period to a record $235 million, Refinitiv data show.

In August New Media Investment Group Inc. secured a $1.8 billion loan from Apollo Global Management for the acquisition of Gannett Co.

That was on the heels of a $1.25 billion unitranche that financed Ion Investment Group’s purchase of financial data provider Acuris in June.

As unitranches have gotten bigger, more lenders are joining forces to underwrite the financings, allowing some to avoid side agreements altogether.

Among the largest players in the booming market are household names in the direct-lending world -- Varagon Capital Partners, Twin Brook, Ares Management, Golub Capital and Antares Capital, which two years ago banded together with Bain Capital Credit to form a joint venture specifically dedicated to unitranches.

“Our goal in general is to provide the sponsor with multiple options in term of how they can finance the business,” said Timothy Lyne, a founding partner at Antares. “They can choose the syndicated route, the club route, or the unitranche, which is absolutely a higher bar from a selection process. Because we’re going deeper into the capital stack, we’re going to be more selective.”

As the unitranche market grows, the loans are also getting cheaper relative to dual first-lien and second-lien structures.