Much of the private credit market lends to operating companies, often owned by private equity sponsors, through senior secured term loans and unitranche facilities sized to a multiple of EBITDA. Alongside that sits special situations lending: loans to companies in transition, under stress or in need of rescue capital. This entry explains each and how we approach them.
Senior secured term loans
A senior secured term loan is a loan for a fixed amount and term, secured by a first-priority lien on substantially all of the borrower’s assets—receivables, inventory, equipment, real estate, intellectual property and the equity of subsidiaries—usually with guarantees from the parent and operating subsidiaries.
Key features:
- First claim on collateral and the strongest position in any restructuring.
- Floating rate, typically a spread over SOFR, sometimes with a floor.
- Amortization of a small percentage per year, plus mandatory prepayments from asset sales, debt issuance and often a share of excess cash flow.
- Covenants, which in private loans to smaller companies usually include financial maintenance tests such as maximum leverage and minimum fixed charge coverage. See covenants explained.
Our own lending is first-lien, senior secured, from $5M–$50M, on terms of 12–36 months, with extension options, and priced at SOFR + 600–900 bps, or a fixed-rate equivalent. The capital structure entry explains why seniority is our first line of defense.
Unitranche
A unitranche combines what would otherwise be a first-lien and a second-lien or mezzanine loan into a single facility with one blended interest rate, one set of documents and one lender group. Borrowers like it for simplicity and speed; there is one negotiation and one counterparty.
First-out and last-out
Unitranche lenders sometimes divide the loan among themselves through an agreement among lenders (AAL). The borrower sees one loan; behind the scenes, a first-out lender takes priority in payment and enforcement at a lower rate, and a last-out lender takes the residual risk at a higher rate. Intercreditor agreements covers how AALs allocate rights.
Illustrative arithmetic
The following is illustrative only.
| Structure | Senior + junior | Unitranche |
|---|---|---|
| Senior loan | 3.0x EBITDA at S+500 | — |
| Junior loan | 1.5x EBITDA at 12% fixed | — |
| Single loan | — | 4.5x EBITDA at S+650 |
| Documents and lender groups | Two, plus an intercreditor agreement | One |
The blended cost may be similar; what differs is who holds the risk at the bottom of the stack.
How we view unitranche
Unitranche is not one of our published loan types, and most of the market’s unitranche lending is sized to a multiple of EBITDA rather than to collateral. We look at substance: a unitranche that is fully first-lien, sized within our leverage limits and backed by real or financial assets we can value is assessed like any other senior secured loan. A request where the bottom of the facility depends on enterprise value alone sits closer to mezzanine, and we consider mezzanine only selectively, with strong control rights.
Special situations and rescue lending
Special situations loans finance companies or assets at an awkward moment: a covenant breach, a maturing loan a bank will not extend, a failed refinancing, an operational turnaround, a dispute between owners, or a need to close faster than a bank can. Rescue financing is the acute end of the spectrum, where the borrower needs capital to avoid a default or insolvency.
These situations can be well secured. A company with a bad year and substantial receivables, equipment or real estate may be a better credit than its earnings suggest. Tight timelines, complex borrower structures or assets in operational turnaround are situations that automated bank models reject, and they are where we can help, provided the collateral coverage is strong.
Common structures
- Refinancing a departing lender, with tighter controls and reporting than the prior facility.
- Asset-based term loans for turnarounds, sized to liquidation value with amortization from asset sales or cash flow.
- PIK interest for part of the coupon, so cash goes into the turnaround rather than debt service. See amortization, call protection, PIK and interest reserves.
- Debtor-in-possession (DIP) financing in a Chapter 11 case, which can receive court-approved priority. It is a specialized product outside our published loan types.
Project Anvil is an example of a turnaround term loan with a PIK component.
What we look for
| Question | Why it matters |
|---|---|
| Is the problem operational, financial or both? | A sound business with the wrong capital structure is easier to fix than a failing business |
| What is the collateral worth in a downside? | Repayment must not depend on the turnaround succeeding |
| Who is leading the turnaround? | Credible management, and owners with equity still at risk |
| What other claims rank ahead in practice? | Taxes, payroll, landlords and suppliers with liens can erode collateral |
| How quickly is cash being consumed? | Liquidity runway determines how much time the plan has |
Turnarounds where the operational plan is credible and the collateral coverage is strong fit our asset-based and corporate focus area.
Red flags across all three
- Leverage justified by adjusted EBITDA full of add-backs.
- Collateral whose value depends on the business continuing as a going concern.
- A capital structure where our position would be first-lien in name but behind priority claims in practice.
- Borrowers who disclose problems late. Complexity is not a reason to decline; surprises are.
If you are considering a corporate loan, check our criteria and send the request through the contact form. For how leverage multiples are calculated, see leverage: loan-to-value, loan-to-cost and debt multiples. Back to the chapter overview.
This entry is general information as of November 2026, not investment, legal or tax advice, and not an offer of securities.