Security & Collateral · glossary
The position of a lender to a parent company, which stands behind the subsidiary's own creditors. If Tooling failed, its landlord, suppliers and staff would be paid from its assets first. Only what is left would reach the Company, and so the Bank. Chapter 7
Explained in Chapter 7, The Guarantor, the Group and the Negative Pledge, of Security & Collateral.
Also explained in Finance Deals & Syndicated Lending.
The Bank lends to the Company, which owns all the shares in Tooling and can reach Tooling's value only through them. If Tooling fails, its own creditors are paid first from its assets: the landlord, the suppliers and the staff. Only what is left goes to the shareholder, and so to the shareholder's lender. Lawyers call this structural subordination.Read Chapter 7, The Guarantor, the Group and the Negative Pledge →
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