The extra yield lenders were compensated to own a unitranche reached an all-time low of 38 basis points in the fourth quarter before rising slightly in 2019, according to data from Refinitiv. Private equity-backed unitranches have priced to yield an average of 604 basis points over the London interbank offered rate this year, the data show.
“I see no reason why unitranche as a financing solution won’t continue to grow as long as the pricing is competitive and the terms are favorable,” said Jeffrey Stevenson, managing partner at private investment firm VSS. “There’s a hunger for yield, so the source of capital should continue to flow into these debt providers who will in turn have increasingly large pools of capital to deploy.”
--With assistance from Lisa Lee.
This article was provided by Bloomberg News.