Fulcrum Security
Private Equity glossary · Private Equity Fundamentals
Definition
The security in a distressed company's capital structure most likely to be converted to equity in a restructuring.
Fulcrum Security in plain English
When a company is drowning in debt and heads into a restructuring (a court-supervised or negotiated do-over of who gets paid), its lenders and owners get paid back in a strict pecking order — the safest lenders first, riskier ones next, and shareholders dead last. The 'fulcrum security' is the exact point in that line where the money runs out: the group that's too far down to be paid in full with cash, but not so far down that they get nothing. Because they're on the knife's edge, they usually get handed ownership (equity) in the reborn company instead of cash — which means whoever holds the fulcrum security often ends up CONTROLLING the whole business afterward. Distressed investors obsess over spotting it, like guessing exactly which link in a chain will snap under weight.
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