Structures
Security and collateral in private credit, explained
First and second charges, asset pledges, receivables assignments and guarantees — and why ranking matters in a recovery.
· 7 min read
Ranking determines who is paid first
A first charge gives a lender priority over an asset ahead of other creditors. A second charge ranks behind it. In an enforcement, proceeds are applied in order of ranking, so the same asset can provide very different protection to different lenders.
Collateral value is an estimate
Valuations depend on assumptions and dates. Commodities move with markets; property values shift with rates and demand; receivables depend on debtor quality. Look for the valuation date, the valuer, and the loan-to-value at the time of lending.
Guarantees are only as strong as the guarantor. A corporate guarantee from a thinly capitalised parent may add little in practice.
This article is general information, not investment advice. Private credit and alternative investments are illiquid and high risk. You may lose some or all of your capital. Indicative returns are not guaranteed.