Kiravan Healthcare needs Rs 1,200 crore. A syndicated loan prices at 350 basis points with a 1% discount, up to 50 basis points of flex and six weeks to close; a private credit unitranche prices at 575 with a 2% fee and certain terms. What is the cost gap, and what is the certainty worth?

The unitranche costs about 235 basis points a year more than the syndicated loan on an expected basis, about Rs 28 crore a year and Rs 113 crore over four years. That buys price certainty worth at most 50 basis points, speed of four weeks and simpler terms. Unless missing the timetable would cost Kiravan more than about Rs 1,128 crore, I would take the syndicated route.

Put everything on one yearly number. A discount or fee paid today is spread over the loan's expected life. The syndicated loan costs 350 plus 25 a year for the discount, 375 basis points, and up to 425 if flex is used; the unitrancheA single loan that replaces a senior and junior layer of debt, usually provided by one private credit fund at one blended price. costs 575 plus 50 a year for the fee, 625. Weighting a 30% chance of full flex, the syndicated route costs about 390, so the expected gap is 235 basis points, Rs 28.2 crore a year.

Buying a train ticket months ahead versus paying extra for a guaranteed seat on the day: the second costs more because the seat is certain. Private credit sells certainty and speed, and both can be measured. Price certainty is worth at most the 50 basis point flex, Rs 6 crore a year, and on the desk's odds about 15 basis points. Speed is worth whatever four weeks are worth to Kiravan. Add simpler dealings: one lender to talk to instead of dozens, which matters if the business ever needs a waiver.

When failure costs more than the premium. The premium over four years is about Rs 113 crore; with a 10% chance that syndication stalls, private credit pays only if a stalled deal would cost Kiravan more than about Rs 1,128 crore. That is plausible if the money funds an acquisition with a hard deadline and a large break fee, and not plausible for a refinancing that can wait. Here Kiravan is refinancing and building, so the syndicated route wins. A sensible hedge is to ask the banks for an underwritten commitment, which moves the syndication risk onto them.

State the limits. Private credit loans often carry call protection, so refinancing early costs extra, and covenants may be tighter. Syndicated loans need a rating and public disclosure. Neither is free; the case asks you to price the difference and decide.