Priority of debt
Alright my lev fin mates, we’re looking to raise some debt and trying to wrap our heads around the following :
We’re raising debt at a holdco that holds an opco. Opco will provide upstream guarantee to holdco, and opco has existing secured and unsecured debt. The holdco lenders will have pledges over the holdco / opco shares.
Question is, if there is a default on the holdco debt, how senior will this rank on the opco’s cap stack? Will the waterfall of the opco be opco secured debt, followed by holdco secured debt, followed by opco unsecured debt?
Appreciate if anyone can elaborate on how it would work and why. Thanks mates
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