Private Credit Middle Market

Start by framing the borrower and ownership model, then normalize EBITDA for recurring costs like stock-based compensation and capitalized development. Map the capital structure, review covenant documentation and value-leakage baskets, stress the amendment path, and define post-close monitoring triggers.

A unitranche combines senior and subordinated economics into one borrower-facing facility, with risk allocation handled internally through an Agreement Among Lenders. Traditional splits use separate documents and explicit intercreditor agreements, making recovery analysis more familiar but administration more complex.

Sponsor-backed deals offer stronger governance and reporting but carry financial engineering and documentation leakage risk. Non-sponsored deals may have tighter covenants but face key-person dependency, weaker reporting quality, and governance substitution challenges.

Use this skill for direct lending, unitranche, and middle market private credit underwriting with maintenance covenants and relationship-driven documentation. For broadly syndicated loans or high-yield bonds, use the modeling-and-valuation skill instead.

Private credit marks may lag realizable secondary value, and documentation strength only matters if lenders enforce it. Sponsor support is path-dependent and should not be treated as hard credit enhancement, while non-sponsored deals carry deeper key-person and reporting risks.