What is a Senior Stretch Loan?
A senior stretch loan is a type of hybrid loan structure offered primarily to middle-market companies to finance leveraged buyouts (LBOs). Similar to “unitranche” financing, the senior stretch loan combines senior debt and junior (or subordinated debt) into one package, typically at a lower average cost to the borrower than a separate senior loan and junior piece (mezzanine or second lien).
How a Senior Stretch Loan Works
Senior stretch loans “stretch” to accommodate the financing needs of the borrower, but at a higher risk to the lender than a conventional senior loan. With this higher risk comes a higher blended interest payment to the lender.
