Protecting the loan. In terms of ranking of stakeholders in a company, there is a legal precedent. If you are holding secure debt, which is also typically Senior, you are more likely to be paid upon liquidation. There is increasingly a form of Super Senior secure debt which is typically reserved for revolvers. Pari passu is a term that you'll hear often. It means that all debt holders within the same creditor class are treated equally which means repaid at the same time and proportionally the same. In some countries, fixed charge creditors, which are loans that are tied to specific assets, these are typically the banks, have preference over floating rate creditors. These are typically obligations that are not tied to a specific asset like trade creditors. The lower the ranking of the debt, the higher the loss given default percentage. In a capital structure, the riskier the loan, the more security the lenders will desire. Secured and Senior loans are considered the safest, provided that they do not make up too much of the capital structure, in which case there could be a scramble by several lenders to sell assets and recover loans in a bankruptcy. In super risky deals, the lenders will take stock pledges in the operating companies or OpCos as security. This effectively gives lenders control of the assets if there is a default. Now, one caveat here is that in a bankruptcy, a court could collapse the holding company and operating company structure, and render the stock worthless. In this severe case, what was once a Senior secured lender is now a Senior unsecured lender. In addition to what has already been said about guarantees, a subsidiary guarantee, also referred to as a global guarantee, is if an issuer goes into bankruptcy, all of the OpCo units or subsidiaries are responsible to pay the loan. Inter-creditor agreements are agreements to determine the rights of different creditor classes. Some examples include guidelines on which Senior creditors can prevent payments to junior creditors. Guidelines on whether Senior creditors need to take into account the interests of junior creditors or when junior creditors can take action against the company, and also who in the bank or lender group can vote and when, and the majority needed to bind the remaining of the group to take action.
