Structural subordination - Revision history

imported>Doug Williamson: Add space.

2018-11-07T16:22:00Z

Add space.

← Older revision		Revision as of 16:22, 7 November 2018
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	#The ownership structure of the borrower, for example in a group of companies; and		#The ownership structure of the borrower, for example in a group of companies; and
	#Holding a claim against the 'wrong' legal entity.		#Holding a claim against the 'wrong' legal entity.


	For example, the claims of the creditors of a holding company may become structurally subordinated to the claims of creditors of the subsidiary companies in the same group. This is because the claim of the holding company itself - as a shareholder of the subsidiary - is generally subordinated to the claims of the other creditors of the subsidiary.		For example, the claims of the creditors of a holding company may become structurally subordinated to the claims of creditors of the subsidiary companies in the same group. This is because the claim of the holding company itself - as a shareholder of the subsidiary - is generally subordinated to the claims of the other creditors of the subsidiary.

	Lenders will usually seek to lend to a group company which holds material assets, or to a holding company where other lender claims over the subsidiaries' assets are less than 15% of the group debt. Loans to subsidiaries are therefore not preferred for group funding unless there is a material cost benefit, a regulatory reason such as we have in UK utility regulation, or limited liability to the group as may be the case in some forms of project finance.		Lenders will usually seek to lend to a group company which holds material assets, or to a holding company where other lender claims over the subsidiaries' assets are less than 15% of the group debt. Loans to subsidiaries are therefore not preferred for group funding unless there is a material cost benefit, a regulatory reason such as we have in UK utility regulation, or limited liability to the group as may be the case in some forms of project finance.


	Structural subordination can be particularly problematic where the subsidiary is in a different country from the holding company, where local legal and other claims may effectively erode the position of the holding company's creditors.		Structural subordination can be particularly problematic where the subsidiary is in a different country from the holding company, where local legal and other claims may effectively erode the position of the holding company's creditors.

imported>Baseby2@msn.com at 16:48, 6 November 2018

2018-11-06T16:48:17Z

← Older revision		Revision as of 16:48, 6 November 2018
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	#Holding a claim against the 'wrong' legal entity.		#Holding a claim against the 'wrong' legal entity.

			For example, the claims of the creditors of a holding company may become structurally subordinated to the claims of creditors of the subsidiary companies in the same group. This is because the claim of the holding company itself - as a shareholder of the subsidiary - is generally subordinated to the claims of the other creditors of the subsidiary.

	~~For example~~, ~~the claims of the creditors of~~ a holding company ~~may become structurally subordinated to~~ the ~~claims of creditors~~ of the ~~subsidiary companies~~ in the ~~same~~ group.		Lenders will usually seek to lend to a group company which holds material assets, or to a holding company where other lender claims over the subsidiaries' assets are less than 15% of the group debt. Loans to subsidiaries are therefore not preferred for group funding unless there is a material cost benefit, a regulatory reason such as we have in UK utility regulation, or limited liability to the group as may be the case in some forms of project finance.

	~~This is because the claim of the holding company itself - as a shareholder of the subsidiary - is generally subordinated to the claims of the other creditors of the subsidiary.~~		Structural subordination can be particularly problematic where the subsidiary is in a different country from the holding company, where local legal and other claims may effectively erode the position of the holding company's creditors.


	~~This~~ can be particularly problematic where the subsidiary is in a different country from the holding company, where local legal and other claims may effectively erode the position of the holding company's creditors.

imported>Doug Williamson: Clarify

2015-04-06T19:31:16Z

Clarify

← Older revision		Revision as of 19:31, 6 April 2015
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	''Risk management''.		''Risk management''.

	~~An effective~~ reduction in the ranking of the claim of a lender or other creditor resulting from a combination of:		A reduction in the effective ranking of the claim of a lender or other creditor resulting from a combination of:

	#The ownership structure of the borrower, for example in a group of companies; and		#The ownership structure of the borrower, for example in a group of companies; and

imported>Doug Williamson: Space.

2015-04-06T06:25:35Z

Space.

← Older revision		Revision as of 06:25, 6 April 2015
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	#The ownership structure of the borrower, for example in a group of companies; and		#The ownership structure of the borrower, for example in a group of companies; and
	#Holding a claim against the 'wrong' legal entity.		#Holding a claim against the 'wrong' legal entity.


	For example, the claims of the creditors of a holding company may become structurally subordinated to the claims of creditors of the subsidiary companies in the same group.		For example, the claims of the creditors of a holding company may become structurally subordinated to the claims of creditors of the subsidiary companies in the same group.

imported>Doug Williamson: Space.

2015-04-06T06:24:51Z

Space.

← Older revision		Revision as of 06:24, 6 April 2015
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	This is because the claim of the holding company itself - as a shareholder of the subsidiary - is generally subordinated to the claims of the other creditors of the subsidiary.		This is because the claim of the holding company itself - as a shareholder of the subsidiary - is generally subordinated to the claims of the other creditors of the subsidiary.


	This can be particularly problematic where the subsidiary is in a different country from the holding company, where local legal and other claims may effectively erode the position of the holding company's creditors.		This can be particularly problematic where the subsidiary is in a different country from the holding company, where local legal and other claims may effectively erode the position of the holding company's creditors.

imported>Doug Williamson: Spacing and category added 20/8/13

2013-08-20T08:29:26Z

Spacing and category added 20/8/13

← Older revision		Revision as of 08:29, 20 August 2013
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	''Risk management''.		''Risk management''.

	An effective reduction in the ranking of the claim of a lender or other creditor resulting from a combination of:		An effective reduction in the ranking of the claim of a lender or other creditor resulting from a combination of:
	~~(1) The ownership structure of the borrower, for example in a group of companies; and~~
	~~(2) Holding a claim against the 'wrong' legal entity.~~

	For example, the claims of the creditors of a holding company may become structurally subordinated to the claims of creditors of the subsidiary companies in the same group. This is because the claim of the holding company itself - as a shareholder of the subsidiary - is generally subordinated to the claims of the other creditors of the subsidiary.		#The ownership structure of the borrower, for example in a group of companies; and
			#Holding a claim against the 'wrong' legal entity.

			For example, the claims of the creditors of a holding company may become structurally subordinated to the claims of creditors of the subsidiary companies in the same group.

			This is because the claim of the holding company itself - as a shareholder of the subsidiary - is generally subordinated to the claims of the other creditors of the subsidiary.

	This can be particularly problematic where the subsidiary is in a different country from the holding company, where local legal and other claims may effectively erode the position of the holding company's creditors.		This can be particularly problematic where the subsidiary is in a different country from the holding company, where local legal and other claims may effectively erode the position of the holding company's creditors.


	== See also ==		== See also ==
	* [[Subordination]]		* [[Subordination]]


			[[Category:Financial_risk_management]]

imported>Administrator: CSV import

2012-10-23T14:20:48Z

CSV import

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''Risk management''.
An effective reduction in the ranking of the claim of a lender or other creditor resulting from a combination of:
(1) The ownership structure of the borrower, for example in a group of companies; and
(2) Holding a claim against the 'wrong' legal entity.

For example, the claims of the creditors of a holding company may become structurally subordinated to the claims of creditors of the subsidiary companies in the same group. This is because the claim of the holding company itself - as a shareholder of the subsidiary - is generally subordinated to the claims of the other creditors of the subsidiary.

This can be particularly problematic where the subsidiary is in a different country from the holding company, where local legal and other claims may effectively erode the position of the holding company's creditors.

== See also ==
* [[Subordination]]