Unitranche Facilities and Agreements Among Lenders: One Loan, Two Tranches, and a Private Waterfall

Document type: Article Practice area: Finance — Leveraged Finance Jurisdiction: United States Last reviewed: 5 September 2026

One loan on the outside

A borrower signs a credit agreement for a $300 million term loan at a single rate, secured by a single first-priority lien, with one agent and one set of covenants. There is one tranche, one maturity, and one intercreditor arrangement — none, because there is only one facility.

Behind that document sit two or more groups of lenders with materially different economics, divided by an agreement among lenders to which the borrower is typically not a party and which it often has never read.

That is the unitranche structure, and its purpose is straightforward: it lets a borrower execute one financing with one counterparty group, at one blended rate, on one timetable, while the lenders privately allocate risk and return between a lower-risk, lower-return "first out" tranche and a higher-risk, higher-return "last out" tranche.

Why it exists. In a conventional structure, a borrower seeking senior and junior capital negotiates two credit agreements, two sets of covenants, two security packages, and an intercreditor agreement it is a party to and must live with. That takes longer, costs more, and produces a document set that constrains the borrower in two directions. The unitranche collapses all of it into one negotiation.

Who provides it. Private credit funds, business development companies, and specialist direct lenders, frequently in club arrangements. The first-out tranche is often provided by a bank or an asset-based lender attracted by the lower risk; the last-out by the fund that led the deal. The structure is the signature product of the private credit market, and its growth has tracked that market's.

The economics: the skim

The borrower pays one rate. Say SOFR plus 600 basis points on $300 million.

The lenders divide it unevenly. The agreement among lenders allocates the interest so that the first-out tranche receives a lower rate and the last-out receives a higher one, with the difference — the skim — flowing from the first-out to the last-out.

A simple illustration:

Tranche	Amount	Effective rate	Rationale
First out	$120M	SOFR + 350	Lower risk: paid first in the waterfall
Last out	$180M	SOFR + 767	Higher risk: paid after the first out
Blended	$300M	SOFR + 600	What the borrower pays

The mechanics. The agent collects interest at the blended rate and applies it per the agreement among lenders — either by paying each tranche at its own rate, or by paying pro rata and requiring the first-out lenders to remit the skim to the last-out lenders. The second construction appears where the credit agreement itself is silent about tranches, which is common.

Why the skim is worth understanding. It is the entire commercial deal between the lenders, and it is where their negotiation happens. A first-out lender at SOFR plus 350 on the safest slice of a leveraged credit is earning a bank-like return on a fund-originated deal; a last-out lender at SOFR plus 767 is earning a mezzanine-like return without mezzanine's structural subordination. Both are better off than they would be in a conventional structure, which is why the market pays for the complexity.

The waterfall

The heart of the agreement among lenders is the application of proceeds, and it operates differently before and after a trigger event.

Ordinarily — no default, no acceleration — payments are applied to interest at the respective rates and to principal per the credit agreement's amortization, and both tranches are treated in the ordinary course.

After a trigger event — commonly a bankruptcy, an acceleration, or an enforcement action, and sometimes a payment default or a specified financial covenant breach — the waterfall becomes strictly sequential:

Agent's fees, costs, and expenses of enforcement
First-out interest, then first-out principal, until paid in full
Last-out interest, then last-out principal
Remaining obligations
Surplus to the borrower

The consequence is the entire point. In a stressed credit, the first-out tranche is paid in full before the last-out receives anything. A recovery of 40% on a $300 million facility pays the $120 million first-out in full and leaves the last-out with a fraction of its $180 million.

Design questions that matter:

What triggers the sequential waterfall? A broad trigger — any event of default — advantages the first out; a narrow one — bankruptcy or acceleration only — advantages the last out. Most agreements sit between, triggering on bankruptcy, acceleration, payment default, and specified covenant breaches.
Is post-trigger interest paid to the last out? Usually not until the first out is paid in full, which compounds the effect.
How are proceeds of different collateral applied? Where the first-out lender is an asset-based lender with an interest in working capital assets, a split waterfall may allocate accounts and inventory proceeds differently from fixed asset proceeds.
Are the tranches paid pro rata as to principal before a trigger? Ordinarily yes, though some structures amortize the first out preferentially.

Voting and control

The borrower deals with one agent and one set of amendment provisions. The agreement among lenders decides who actually controls that vote.

The usual allocation.

Ordinary amendments and waivers — administrative changes, minor covenant relief, consents to routine transactions — are typically controlled by the required lenders under the credit agreement, computed across both tranches, which means the larger tranche generally controls. Since the last out is usually larger, the last-out lender usually controls day-to-day decisions.

Enforcement — acceleration, exercise of remedies, foreclosure, credit bidding — is the contested area. Common constructions:

First-out control, on the theory that the safest tranche should control the timing of realization, subject to a standstill after which the last out may act;
Last-out control, on the theory that the tranche with the residual risk should decide, subject to the first out's right to be paid;
Control shifting with the credit's condition, so that the last out controls while the credit performs and the first out controls after a specified deterioration;
Joint control with a deadlock mechanism.

Sacred rights — matters requiring each tranche's consent, or each lender's:

Reduction of principal or interest applicable to that tranche
Extension of that tranche's maturity
Changes to the waterfall or to the skim
Release of all or substantially all collateral or guarantees
Changes to the sacred rights list or the voting thresholds
Increases in the facility that dilute the tranche
Changes to the definition of the trigger event

The provision most fought over is the standstill: how long the last out must wait, after a default, before it may take enforcement action if the first out does not. Ninety to one hundred eighty days is typical, with the standstill terminating on a bankruptcy filing.

The buyout option

The most elegant provision in the structure, and the one that most reliably resolves conflicts.

The right. On a trigger event, the last-out lender may purchase the first-out tranche at par plus accrued interest and, sometimes, a stated premium or prepayment fee, on short notice — commonly ten business days.

Why it works. The last-out lender's fear is that the first out, having a full recovery in sight, will force a liquidation that maximizes speed rather than value. The buyout option removes the fear: if the first out moves to enforce, the last out can simply buy it out and control the outcome itself.

Why the first out accepts it. The option pays par. A first-out lender that wanted to be repaid gets repaid, immediately, which is the outcome it was pursuing anyway.

Design points:

Trigger. On any event of default, on acceleration, on the first out's initiation of enforcement, or on bankruptcy.
Price. Par plus accrued, plus any prepayment premium that would have been payable. Whether the premium applies is negotiated and can be significant.
Timing. A short exercise window and a short closing period, because the option is worthless if the first out can enforce during it. Standstills usually run during the exercise period.
Who may exercise. Each last-out lender pro rata, with a mechanism for non-participants' shares to be taken up.
Reciprocity. Occasionally the first out has a corresponding right to buy out the last out, though this is less common and less valuable.

The question that has always troubled the structure

Does the agreement among lenders bind in a bankruptcy case?

The concern is structural. In a conventional first lien / second lien deal, the intercreditor agreement is a subordination agreement between creditors of the debtor, and 11 U.S.C. § 510(a) provides that a subordination agreement is enforceable in a bankruptcy case to the same extent as under applicable non-bankruptcy law. That is a clear statutory hook.

An agreement among lenders is a contract among holders of a single class of claims under a single credit agreement, to which the debtor is not a party. Several questions follow:

Is it a "subordination agreement" within § 510(a)? Probably yes in substance — it subordinates one group's right to payment to another's — but the question has been litigated because the tranches are not separate claims against the debtor.
Can it bind the bankruptcy court's classification and voting? The lenders are, on the face of the credit agreement, one class. Can lenders contract privately about how they will vote on a plan? Provisions purporting to give one group the right to vote another's claim have been viewed skeptically, and some courts have declined to enforce assignments of voting rights.
Can it restrict a lender's right to object, to seek adequate protection, or to be heard? Waivers of these rights appear in agreements among lenders and have uncertain enforceability, since the Bankruptcy Code confers standing on parties in interest.
Does the waterfall apply to distributions under a plan? This is the practically important question, and the answer is generally yes where the agreement is enforced as a subordination agreement — the lenders may be paid pro rata by the estate and required to redistribute among themselves under the contract.

Cases in the neighborhood. In re Boston Generating, LLC, 440 B.R. 302 (Bankr. S.D.N.Y. 2010) addressed the enforcement of intercreditor provisions restricting a second lien lender's ability to object to a sale, and In re Ion Media Networks, Inc., 419 B.R. 585 (Bankr. S.D.N.Y. 2009) enforced intercreditor limitations against a second lien holder seeking to challenge the first lien position, emphasizing that sophisticated parties are held to their bargains. Both concern conventional intercreditor agreements rather than agreements among lenders, but they establish the disposition — courts enforce creditor-to-creditor bargains — that the unitranche market relies on.

How practice responded

Because the question is unresolved, documentation has developed to reduce the exposure:

Express characterization of the agreement as a subordination agreement within § 510(a), with a statement of the parties' intent that it be so enforced.
A "deemed separate classes" provision, providing that the tranches will be treated as separate classes for plan purposes and that each will vote separately, with the lenders agreeing to support any plan consistent with the waterfall.
Turnover provisions — the more robust approach. Rather than relying on the court to apply the waterfall, the agreement requires any lender receiving a distribution in excess of its waterfall entitlement to hold it in trust and turn it over. Turnover obligations are contract claims between the lenders and do not require the bankruptcy court to do anything.
A prohibition on objecting to specified relief, plus an appointment of the controlling lender as attorney-in-fact — of uncertain enforceability but included.
The buyout option, which is the practical answer: a last-out lender that dislikes where a case is going buys the first out and controls it. The option works entirely outside bankruptcy law, since it is an ordinary contract right exercised between non-debtors.

The honest assessment. The turnover provision and the buyout option are the load-bearing elements. The classification and voting provisions are useful and may be enforced, but a structure that depends on them is a structure with a genuine risk.

Unitranche compared with first lien / second lien

	Unitranche	First lien / second lien
Documents the borrower signs	One credit agreement	Two credit agreements plus an intercreditor
Borrower's counterparties	One agent, one group	Two agents, two groups
Speed	Faster	Slower
Covenants	One set	Two, with a cushion between them
Borrower's intercreditor exposure	None; the borrower is not a party to the AAL	Party to the intercreditor and bound by it
Lender allocation of risk	Contractual, private	Structural, public
Bankruptcy enforceability	Less settled	Well established under § 510(a)
Amendment friction	Lower — one document	Higher — two, with cross-conditions
Transferability	Constrained by the AAL's transfer provisions	Loans trade in their own markets
Typical providers	Private credit funds, banks in the first out	Banks and institutional investors

When unitranche is the right answer. Middle-market transactions where speed and certainty matter; sponsors that value a single negotiation; borrowers whose size does not support two syndications; and situations where the last-out lender wants control over the credit without the visibility of a public second lien.

When the conventional structure is better. Larger financings that can be syndicated; borrowers who want their debt to trade; situations where the bankruptcy enforceability question matters because distress is a realistic scenario; and cases where the borrower wants to know the intercreditor terms it will be subject to.

What the borrower should care about

The borrower is not a party to the agreement among lenders, but it is affected by it, and there are terms worth negotiating in the credit agreement even though the AAL is not on the table.

Who am I talking to? The credit agreement should identify the agent and, ideally, the borrower should know which lenders hold which tranche. A borrower negotiating a waiver with an agent that must obtain the last out's consent, without knowing that, is negotiating blind.

Will the AAL delay my amendments? The credit agreement's amendment provisions govern, but the agent will need the AAL-required consents. Ask for a covenant that the lenders' internal arrangements will not delay a response beyond a stated period. Lenders resist, but a soft version is often achievable.

What happens if the tranches disagree? A borrower needing a waiver in a stressed credit can find itself hostage to a dispute between two lender groups. The buyout option resolves this eventually, but slowly.

Can I refinance the first out separately? Usually not — the credit agreement treats the facility as one. A borrower that wants the flexibility to replace the cheaper tranche should negotiate for it, and will usually be refused.

Transfer restrictions. The credit agreement should restrict assignments to competitors and to disqualified institutions, and the borrower should have a consent right for assignments outside the existing lender group. The AAL's transfer provisions will bind assignees, which is the mechanism by which the structure survives trading.

Prepayment. Whether a prepayment is applied pro rata across tranches or preferentially to the first out affects the borrower only through the AAL, but a borrower prepaying to reduce its blended rate should understand that the AAL may direct the payment in a way that does not reduce the blended cost proportionately.

The most valuable thing a borrower can do is ask to see the agreement among lenders. Lenders usually decline, and a borrower with leverage sometimes gets it — or gets a term sheet summary of the waterfall, the voting construct, and the buyout option. Knowing whether the first out or the last out controls enforcement is worth having before signing.

Variations on the structure

The two-tranche unitranche is the base case, and the market has developed several variants.

The bifurcated unitranche. Rather than dividing a single tranche by contract, the credit agreement itself creates two tranches with different rates and an intercreditor relationship set out in the credit agreement. This addresses the bankruptcy enforceability concern directly — the tranches are separate classes on the face of the document, with the debtor as a party — at the cost of the borrower seeing and negotiating the arrangement. Increasingly common where the parties want certainty over elegance.

The unitranche with a super-senior revolver. A separate revolving facility, usually asset-based, sits above the unitranche with priority in the waterfall over working capital collateral. Documented as a conventional intercreditor because the revolver is a separate facility with a separate lender. This is the most common real-world configuration, because the borrower needs a revolver and the unitranche provider does not want to fund one.

Three or more tranches. First out, second out, and last out, with a stepped waterfall and correspondingly graduated rates. Adds complexity and negotiation, and is used where the capital stack needs finer risk slicing.

The first-out revolver inside the unitranche. The revolving commitment is itself the first-out tranche, so that a single credit agreement covers both, with the revolver paid first. Neat, and it concentrates the working capital risk with the lender best able to monitor it.

Delayed draw and incremental tranches. Acquisition facilities frequently include delayed draw term loans. The agreement among lenders must address how a delayed draw is allocated between tranches, and whether the allocation is fixed at closing or determined at draw.

The recycled first out. As the credit performs and the first out amortizes, some structures permit the last out to sell down a further first-out slice, maintaining the ratio and the blended economics. Requires the AAL to contemplate new first-out lenders joining.

Payment-in-kind features. Where part of the last-out return accrues rather than being paid currently, the waterfall and the skim must address accrued PIK interest — whether it is paid before or after first-out principal, and how it compounds. This is a real negotiation and is frequently under-drafted.

Transfers and the market for unitranche paper

A first-out or last-out position is not a loan in the ordinary syndicated sense, and its transferability is constrained in ways that affect pricing.

What binds an assignee. The credit agreement's assignment provisions govern the transfer of the loan; the agreement among lenders binds the assignee only if it becomes a party. Every AAL therefore requires, as a condition to any transfer, that the assignee execute a joinder — and requires the transferor to remain liable if it does not.

Practical consequences:

Sales are slower. An assignee must diligence not only the credit but the AAL, and must accept a private contract it did not negotiate.
The buyer universe is narrower. Institutions that buy broadly syndicated loans are not set up to hold a last-out position governed by a bespoke agreement.
Pricing reflects it. Unitranche paper trades at a discount to comparable syndicated risk, and much of it does not trade at all.
Transfer restrictions are common. Rights of first refusal in favor of the other tranche, prohibitions on transfers to the borrower's affiliates or to distressed investors, and minimum hold requirements.

The recurring negotiation. The last-out lender wants to control who holds the first out, because the first out controls enforcement in many structures. The first-out lender wants liquidity. A right of first refusal in favor of the last out, with a short exercise period, is the usual compromise — and it is closely related to the buyout option, since a last out exercising a ROFR on a first-out transfer is doing at market what the buyout option does at par.

A structuring note. Where the first-out tranche is a revolver, transfers are further constrained because the assignee must be able to fund. This is one reason revolvers stay with banks.

A worked example: the Farrowdale facility

The deal. A sponsor acquires Farrowdale Instruments for $410 million, funded with $170 million of equity and a $240 million unitranche provided by Aldenmoor Credit Partners.

The structure. Aldenmoor underwrites the full $240 million and syndicates a $90 million first-out tranche to a commercial bank, retaining $150 million as last out.

The borrower's document. One credit agreement. $240 million term loan at SOFR plus 575. One first lien. Covenants: a total net leverage ratio tested quarterly, an unlimited-basket-free covenant package typical of the private credit market, and a $30 million revolver from the same bank.

The agreement among lenders, which Farrowdale never sees, provides:

Skim. First out at SOFR plus 325; last out at SOFR plus 725. The agent applies payments to give each tranche its rate.
Trigger event. Bankruptcy; acceleration; payment default continuing 5 business days; leverage exceeding 6.5x for two consecutive quarters.
Waterfall on trigger. Expenses; first-out interest and principal in full; last-out interest and principal; then the borrower.
Voting. The last out controls amendments and waivers, holding a majority. Enforcement is controlled by the first out, with a 120-day standstill after which the last out may act if the first out has not.
Buyout option. On any trigger event, the last out may buy the first out at par plus accrued plus any applicable prepayment premium, on 10 business days' notice, with a 15-business-day closing. The standstill and any first-out enforcement are suspended during the exercise period.
Turnover. Any lender receiving a distribution exceeding its waterfall entitlement holds it in trust and turns it over.
Section 510(a) characterization, deemed separate classes, and an agreement to support a plan consistent with the waterfall.

Year three. Farrowdale's largest customer insources a product line. EBITDA falls from $52 million to $34 million. Leverage rises to 7.1x — a trigger event under the AAL, and a covenant breach under the credit agreement.

What happens, in order:

The waterfall turns sequential. The last out stops receiving its skim; payments go to the first out.
The first out controls enforcement. The bank's workout group takes over the relationship and begins pressing for a sale process, which would likely repay it in full and leave the last out short.
Aldenmoor's calculation. A forced sale at 5.0x trailing EBITDA yields roughly $170 million — enough to repay the $90 million first out in full and return $80 million on Aldenmoor's $150 million. Holding the business through a recovery, it believes, is worth substantially more.
Aldenmoor exercises the buyout option. It pays $90 million plus accrued plus a $1.8 million prepayment premium. The bank is repaid in full, which is what it was pursuing anyway, and exits.
Aldenmoor now holds the entire $240 million facility and controls everything. It negotiates directly with the sponsor: an equity contribution, a covenant reset, a maturity extension, and a fee.

What the structure accomplished. The disagreement between two lenders with different risk positions was resolved by a contract mechanism, in three weeks, without litigation and without a bankruptcy. The bank got its money; the fund got control; the borrower got a restructuring rather than a sale.

What Farrowdale experienced. Two months of ambiguity in which its agent could not answer questions, followed by a single counterparty with clear authority. That ambiguity is the borrower's principal cost of the structure, and it is why a borrower with leverage should ask about the voting construct before signing.

The agent's position in a unitranche

The administrative agent under a unitranche credit agreement occupies a position with real practical difficulty, because it acts under one document while its lenders are governed by another it may or may not be party to.

What the agent does. Maintains the register; receives payments from the borrower; applies them per the agreement among lenders; delivers notices; and acts on the instructions of the required lenders as computed under the credit agreement.

The application question is the sensitive one. If the agent is a party to the AAL, it applies payments per the waterfall directly. If it is not, it applies payments per the credit agreement — pro rata — and the lenders redistribute among themselves under the turnover provisions. The first construction is cleaner and is now the market norm, with the agent joining the AAL for this purpose and receiving indemnities from the lenders.

The instruction problem. The credit agreement's "Required Lenders" may direct the agent to accelerate. The AAL may vest enforcement control in the first out, which does not hold a majority. The agent can face a direction from the credit agreement's required lenders that the AAL says they may not give. Well-drafted documents resolve this by defining Required Lenders in the credit agreement by reference to the AAL's control provisions, or by having the AAL's controlling party deliver directions in the name of the required lenders.

Where it goes wrong. Where the credit agreement and the AAL were drafted by different people at different times, the definitions diverge, and the agent receives conflicting directions in a stressed credit. Its response, predictably, is to do nothing until indemnified or until a court speaks — which costs everyone time at the worst moment.

Practical advice. Draft the two documents together, and have the same person check the definitions of Required Lenders, Event of Default, Trigger Event, and Enforcement Action across both. A definitional mismatch between a credit agreement and an agreement among lenders is the most common and most avoidable defect in the structure.

Negotiating the agreement among lenders

The AAL is negotiated between the lenders, usually after the credit agreement's commercial terms are set, and sometimes after closing. The negotiation follows a predictable shape.

What the first out wants:

A broad trigger event, so the sequential waterfall engages early
Enforcement control, or at least a short standstill before it may act
Payment in full before any last-out recovery, including post-trigger interest
No obligation to fund anything further after a default
Free transferability
A high buyout price, including any prepayment premium and, ideally, a make-whole
Protection against dilution by incremental facilities allocated to the last out
Turnover obligations running in its favor, robustly drafted

What the last out wants:

A narrow trigger, limited to bankruptcy, acceleration, and payment default
Control of amendments and waivers, which it usually gets on size
A long standstill before the first out may enforce, or joint control
The buyout option at par, on short notice, suspending the first out's enforcement during the exercise period
A right of first refusal on transfers of the first-out tranche
Skim protection: the skim continues until a genuine trigger, not on a technical default
Consent rights over any increase in the first-out tranche

Where the deals land. The last out controls ordinary decisions; the first out controls enforcement subject to a standstill; the trigger is bankruptcy, acceleration, payment default after a short grace, and a leverage level set with headroom; the buyout is at par plus accrued plus any prepayment premium, exercisable on ten business days' notice with enforcement suspended; and transfers require a joinder plus a ROFR in favor of the other tranche.

The two provisions that are worth more than they look:

The definition of Trigger Event. It determines when the last out stops earning its return, and it is frequently drafted to include covenant breaches that are technical rather than substantive. A last-out lender that agrees to a trigger on "any Event of Default" has agreed that a late compliance certificate stops its skim.

The suspension of enforcement during the buyout exercise period. Without it, the first out can accelerate and enforce while the last out is trying to exercise, which makes the option worthless precisely when it matters.

What happens in a restructuring

The AAL's terms determine how a workout proceeds, and the sequence is worth understanding before it happens.

Out of court. The controlling lender under the AAL negotiates with the sponsor and the company. The other tranche has whatever consent rights the AAL gives it — typically sacred rights over its own economics and over the waterfall, and little else. A last out that has agreed to first-out enforcement control, without a buyout option, has very little say in a workout and will discover this at the worst time.

The buyout as the resolution mechanism. In practice, most unitranche conflicts resolve through the option. The last out, facing a first out pressing for liquidation, buys it out and takes control. This is quick, requires no court, and converts a two-party problem into a one-party decision. It is the structure's principal advantage over a conventional intercreditor, where a second lien lender facing a hostile first lien has only a standstill and a purchase option that is usually harder to exercise.

In a bankruptcy case. The tranches are, on the face of the credit agreement, a single class of claims. What happens next depends on the documentation and on the court:

The estate distributes to the class pro rata, and the lenders redistribute among themselves under the turnover provisions. This is the reliable path and is why turnover provisions matter more than classification provisions.
Where the AAL provides for deemed separate classes and the plan accommodates it, the tranches may be classified and treated separately. This depends on the plan proponent's cooperation and the court's acceptance, neither of which is assured.
Voting is the least certain area. Provisions purporting to let one tranche vote another's claim are viewed skeptically, and a last out that assumed it controlled the class vote may find it does not.
Objections and standing: waivers of the right to object are of uncertain enforceability, since the Code confers standing on parties in interest, but courts enforcing intercreditor bargains have limited second lien holders' ability to be heard on matters they contracted away.

The practical instruction. Exercise the buyout option before a filing if the tranches are in conflict. After a filing, the last out is a member of a class it may not control, subject to a contract whose bankruptcy effect is not fully settled, in a proceeding where its remedy is a turnover claim against another creditor. All of that is avoidable by writing a check at par three weeks earlier.

Quick reference

What it is. One credit agreement, one lien, one rate to the borrower — and two or more tranches with different economics divided by an agreement among lenders the borrower is not party to.

The economics. The skim: the blended rate the borrower pays is split so the first out receives a lower rate and the last out a higher one. This is the whole commercial deal between the lenders.

The waterfall. Ordinary course before a trigger event; strictly sequential after — first out in full before the last out receives anything. The definition of Trigger Event decides when the last out stops earning.

Control. The last out usually controls amendments on size; enforcement control is negotiated, commonly to the first out subject to a standstill of 90 to 180 days. Sacred rights protect each tranche's economics, the waterfall, and releases of substantially all collateral or guarantees.

The buyout option. The last out may take out the first out at par plus accrued plus any prepayment premium, on short notice, with enforcement suspended during the exercise period. This is the mechanism that resolves most conflicts, and it works entirely outside bankruptcy law.

The unresolved question. Whether the AAL binds in a bankruptcy case, where the tranches are one class and the debtor is not a party. Practice responds with express § 510(a) characterization, deemed separate classes, and — most importantly — turnover provisions, which are contract claims between lenders requiring nothing of the court.

Versus first lien / second lien. Faster, simpler, one negotiation, no borrower-facing intercreditor — at the cost of less settled bankruptcy treatment and narrower transferability.

For a borrower. Ask who controls enforcement. Ask whether the lenders' internal arrangements can delay a waiver. Restrict transfers. And ask to see the AAL, or at least a summary of the waterfall, the voting construct, and the buyout option — you will usually be refused, and it is worth asking.

For counsel. Draft the credit agreement and the AAL together, and have one person reconcile the definitions of Required Lenders, Event of Default, Trigger Event, and Enforcement Action across both. A definitional mismatch between the two is the most common defect in the structure, and it surfaces at the worst possible moment.