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ARTICLE · 05 AUGUST 2026

Understanding The Mechanics Of An Unitranche Lending Structure

Mayer Brown
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In leveraged and asset-based lending, the unitranche structure offers a sophisticated approach to allocating risk and return among lenders within a single credit facility. How do first out and last out arrangements work in practice, and what critical provisions should lenders negotiate to protect their interests? This analysis examines the mechanics, economic features, and key considerations that inform participation decisions in these increasingly popular financing structures.

United StatesFinance and Banking
Brian Trudgen
Brian Trudgen
James Adams
James Adams
Jennifer Kratochvil
Jennifer Kratochvil
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In the world of leveraged and asset-based lending, the unitranche(or “first out / last out”) structure has emerged as a practical tool for allocating risk and return among lenders participating in a single credit facility. Rather than creating two distinct tranches of debt with separate credit agreements and intercreditor arrangements, the first out/last out structure achieves a form of internal subordination within a single credit facility. This article provides lenders with an overview of how these arrangements work, the key economic and structural features involved, and the considerations that should inform a lender's decision to participate.

What Is a Unitranche Structure?

A unitranche structure involves a single secured credit facility in which two or more groups of lenders share in the same security interest on the borrower's collateral but agree among themselves to a payment priority and other arrangements.While unitranche facilities can take many forms, a common structure

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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