easy · Private Credit & Debt loan-structures-instruments
A borrower defaults on a loan. The lender identifies that it is 'structurally subordinated' to a local bank at the subsidiary level.
What does this mean for the lender's recovery?
- Both the lender and the bank share the subsidiary's assets equally (pari passu).
- The local bank gets paid in full from the subsidiary's assets before the lender receives anything from that subsidiary.
- The lender is senior to the local bank because the parent company owns the subsidiary.
- The lender can ignore the local bank's claim because the parent company is the primary borrower.
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