medium · Corporate Credit Analysis cap-structure
What is 'Structural Subordination' in a corporate group with a Holding Company (HoldCo) and an Operating Company (OpCo)?
- All debt at the OpCo is secured, while all debt at the HoldCo is unsecured.
- The HoldCo debt is contractually junior to the OpCo debt via the bond indenture.
- HoldCo creditors can seize OpCo assets before any OpCo lenders can take action.
- HoldCo creditors are behind OpCo creditors because OpCo holds the actual assets.
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