Private Credit and Security Interests: Creation, Perfection, Priority and Enforcement

Private credit is lending outside the banking system — by a fund, an insurer, a family office or a single wealthy individual — and almost all of it is secured, meaning the lender takes rights over something the borrower owns so that a loan does not depend only on the borrower's promise to repay. That instinct is right, but it hides four separate things that lawyers keep apart and borrowers routinely blur: the debt claim (a personal right to be paid), the security interest (a property right over a specific asset), the guarantee (a second person's promise), and structural subordination (where in the group the lender sits relative to the assets). A loan can have all four, some, or — more often than the term sheet suggests — a claim that looks secured but is not enforceable against the people who matter.

The single rule that runs through everything below: a security interest is only as good as the moment it becomes effective against third parties, and that moment is set by the law of the place and the register that governs the asset, not by the governing-law clause of the loan agreement. A New York-law facility can leave a lender unsecured over English shares, and an English-law debenture can be worthless over a French building. Creation, opposability and priority are three different questions answered by three different bodies of law, and default does not hand the lender title to anything.

Four things a lender actually holds

Start by taking the term sheet apart, because each of these fails in a different way.

A debt claim is the borrower's obligation to repay principal and interest. It is contractual and personal: it ranks alongside every other unsecured claim if the borrower goes insolvent, and in most systems that means cents on the dollar. Every loan has one. On its own it is the weakest position in the room.

A security interest is a property right the borrower grants over a defined asset — shares, a bank account, a receivable, a building, a portfolio — so that on default the lender can look to that asset ahead of unsecured creditors. This is what turns a lender from a queue-member into a priority claimant. In the United States it is created under Article 9 of the Uniform Commercial Code (a "security interest"); in England it is a mortgage, a fixed charge or a floating charge. The label matters less than what the lender can reach and when.

A guarantee is a third party's promise to pay if the borrower does not — a parent company, a shareholder, a related entity. It multiplies the number of people who owe the debt, but a guarantee is itself only a debt claim against the guarantor unless it too is secured. A guarantee from an asset-poor holding company is decoration; a guarantee from the entity that actually owns the operating assets is worth more than the primary loan. Whether the guarantor may lawfully give it at all is a separate, company-law question: corporate capacity, directors' duties, any financial-assistance restriction and the shareholder approvals that go with them sit with the company's own governance and lifecycle rules, and a guarantee signed without them is an argument waiting to happen.

Structural subordination is the quiet one. If the lender lends to a holding company but the assets and cash sit in an operating subsidiary, the lender's claim is structurally behind every creditor of that subsidiary, because the subsidiary's creditors are paid out of its assets before anything flows up to the holding company as a shareholder distribution. No document creates this subordination; the shape of the group does. It is the reason "we have a guarantee from the group" and "we can reach the assets" are not the same sentence.

How security is built: creation, perfection, priority

Every secured-lending system asks the same three questions in the same order, even though it answers them with different machinery. Take a lender advancing against a company's assets under two contrasting regimes — the US UCC Article 9 and English law — to see where the money can leak out.

Creation (attachment). This is the point at which the security becomes effective between borrower and lender. Under UCC § 9-203 a security interest "attaches" and is enforceable only when three things coincide: value has been given, the debtor has rights in the collateral, and the debtor has authenticated a security agreement describing the collateral. English law reaches the same place differently — a valid charge requires an intention to create security over identified property, expressed in a deed (a debenture, a share charge, a legal mortgage). At this stage the lender has a real right against the borrower. It has nothing yet against anyone else.

Perfection / opposability. This is the step that makes the security effective against third parties — competing lenders, buyers, and above all a liquidator or administrator. It is the step borrowers forget and lenders' junior staff get wrong, and it is almost always tied to a public act.

• In the United States, most security interests are perfected by filing a UCC-1 financing statement in the right state's register; some collateral (deposit accounts, investment property, certificated securities) is perfected instead by control or possession, which usually beats a mere filing.
• In England, a charge created by a company must be delivered to Companies House for registration within 21 days beginning with the day after the date of creation (Companies Act 2006 s.859A). Miss the window and s.859H bites hard: the charge is "void … against a liquidator, an administrator, and a creditor of the company" — while, pointedly, "the money secured by it immediately becomes payable." The debt survives; the security evaporates. Certain assets need a second, asset-specific step on top of the Companies House filing — land at HM Land Registry, aircraft and ships on their own registers, IP on the relevant IP register.

Priority. Once perfected, security interests rank against each other by a tie-break rule. UCC § 9-322(a) states it plainly: conflicting perfected interests "rank according to priority in time of filing or perfection" — the first-to-file-or-perfect rule — and a perfected interest always beats an unperfected one. English law ranks by date of creation for registered charges of the same type, but adds a characterisation problem the US mostly avoids: whether a charge is fixed or floating.

That distinction decides real money. A fixed charge attaches to a specific asset the borrower cannot dispose of freely, and its holder is paid first out of that asset. A floating charge hovers over a shifting pool (stock, receivables, cash) the borrower keeps using until an event of default causes it to "crystallise" — and a floating charge holder is paid after the insolvency practitioner's costs, after preferential creditors (employees, some taxes), and after the prescribed part is carved out for unsecured creditors. The label the parties choose does not settle it: in Re Spectrum Plus Ltd [2005] UKHL 41 the House of Lords held that a charge over book debts under which the company stayed free to use the proceeds was a floating charge despite being drafted as fixed, because the test is the degree of control the lender actually exercises over the asset, not the word on the page.

Same test, two outcomes. Eighteen years later the same control test produced the opposite answer on different facts. In Re Avanti Communications Ltd (in administration) [2023] EWHC 940 (Ch) (Edwin Johnson J, 25 April 2023, claim CR-2022-001108) the administrators of a satellite operator asked whether debenture charges over the network assets — transponders, ground-station equipment, licences and related contracts — were fixed or floating, the company having had permission under the security documents to dispose of some of them in defined circumstances. The judge held that the charge was "not necessarily a floating charge simply because the Company had some ability … to deal with the Relevant Assets or some of them," and concluded that the charges "took effect as fixed charges when created, and remained fixed charges" at the relevant time: the question is whether the asset itself must be preserved for the chargee's benefit, or is at the chargor's free disposal. Put the two cases side by side and the working rule appears — freedom to spend the proceeds of book debts made Spectrum's charge floating, while narrow, consent-gated permissions to dispose of identified equipment did not make Avanti's charges floating. Draft the restrictions around the asset rather than its income, and, as Spectrum Plus insists, actually operate them.

The prescribed part is a fixed number, not a rounding error: under the Insolvency Act 1986 s.176A and the 2003 Order, the practitioner must set aside 50% of the first £10,000 of net property caught by a floating charge and 20% of the rest for unsecured creditors, subject to a cap raised to £800,000 for floating charges created on or after 6 April 2020 (£600,000 before). A lender relying only on a floating charge is quietly subordinated to several classes of creditor before it sees a penny. Two of the rows above are recent and easy to miss: a financial-collateral taker sits outside the register and outside the moratorium, while moratorium debts under s.174A can move ahead of the floating charge in a liquidation that follows a rescue attempt.

Priority beyond the filing date

First-to-file-or-perfect is the default rule, not the whole of priority. Four further routes let a lender who filed later — or never filed at all — sit ahead of an earlier registered creditor, and a fifth way of losing priority needs no competitor at all: the earlier filing simply stops working. A lender that has checked only the date of its own filing has checked one question out of five.

Money that bought the asset comes first

A purchase-money security interest is security taken by the lender whose money enabled the borrower to acquire the very asset charged. UCC § 9-324(a) gives it super-priority: a perfected PMSI in goods other than inventory or livestock "has priority over a conflicting security interest in the same goods" if it is perfected "when the debtor receives possession of the collateral or within 20 days thereafter" — so it defeats an earlier all-assets filing by a general lender. Section 9-317(e) supplies the matching 20-day relation-back against buyers, lessees and lien creditors whose rights arise between attachment and filing. Inventory is deliberately harder: under § 9-324(b) the PMSI must be perfected before the debtor receives the goods, and the earlier filer must be notified.

Control beats filing

For two asset classes the statute ranks the method rather than the date. Section 9-327(1): a security interest held by a party with control of a deposit account under § 9-104 "has priority over a conflicting security interest held by a secured party that does not have control." Section 9-328(1) says the same for investment property controlled under § 9-106. A lender secured on a bank account or a securities portfolio therefore wins or loses on whether it holds a control agreement, not on when it filed — the practical reason account and portfolio security is documented through the account provider rather than the register.

Ranking by agreement, and who holds the security

Priority can also be rearranged privately. UCC § 9-339 is one sentence long: "This article does not preclude subordination by agreement by a person entitled to priority." That is the statutory door through which the intercreditor agreement walks — in most multi-lender private credit it matters more than the filing dates. Its standard machinery is a payment waterfall (who is paid, in what order, out of enforcement proceeds), a standstill (how long a junior lender must wait before enforcing after a default), a turnover obligation (the junior holds on trust for the senior anything it receives out of turn), release provisions (the senior can sell the collateral free of junior security on an enforcement) and enforcement-control thresholds (who may instruct the security agent).

Contractual subordination is not structural subordination, and the difference is operational. Contractual subordination is created by a document and can be renegotiated in one. Structural subordination comes from where the assets sit in the group, and is cured only by moving the lending, the guarantees or the security down to the entity that holds them — which is why group shape is a credit question and not only a tax one, and why the choice of holding structure is settled before the facility rather than after it.

In a club or syndicated facility the security is granted once, to one holder, for a lender group that will change. Both regimes provide for this expressly: UCC § 9-102(a)(73)(E) defines "secured party" to include "a trustee, indenture trustee, agent, collateral agent, or other representative in whose favor a security interest … is created or provided for," and the UK financial-collateral definition contemplates collateral held by "the collateral-taker or a person acting on its behalf" (SI 2003/3226 reg 3(1)(c)). Where the law of the asset does not accept one person holding security for a shifting class of others, facilities add a parallel debt covenant: the borrower owes a mirror obligation to the agent in the agent's own name, and the local security secures that mirror obligation. Whether the device holds is a question for the law of the asset and its courts, not for the facility agreement — so it is answered before closing. Where the lender is itself a fund, what it may borrow, secure and guarantee is capped by its own constitutional documents rather than by the facility: see the fund's own documents.

Perfection is not a one-time act

A filing has a life span. UCC § 9-515(a): a financing statement "is effective for a period of five years after the date of filing." Section 9-515(d): a continuation statement "may be filed only within six months before the expiration of the five-year period." A seven-year loan therefore needs a diarised continuation in year five; miss the six-month window and perfection lapses, and a lapsed interest loses both to a perfected competitor and to a lien creditor. Two more clocks run quietly: under § 9-507(c) a debtor's name change that makes the filing seriously misleading leaves it effective only for collateral acquired before, or within four months after, the change; under § 9-316(a)(2) perfection survives the debtor's move to another jurisdiction for only four months.

Authorisation, not intention. The most expensive perfection failure on record was clerical. In the run-up to General Motors' 2009 bankruptcy, a UCC-3 termination statement prepared for the payoff of an unrelated synthetic lease also named the financing statement that perfected a $1.5 billion syndicated term loan, and the closing set was reviewed and approved. On a certified question the Delaware Supreme Court answered, in Official Committee of Unsecured Creditors of Motors Liquidation Co. v. JPMorgan Chase Bank, N.A. (No. 325, 2014, decided 17 October 2014), that it is "enough that the secured lender review and knowingly approve for filing a UCC-3 purporting to extinguish the perfected security interest": under § 9-509(d)(1) the question is whether the secured party authorised the filing, not whether it intended to terminate that particular interest. Subjective intent does not rescue a filing that was authorised in fact. The English safety valve is narrower but real — Companies Act 2006 s.859F lets the court extend the 21-day period where the failure to deliver "was accidental or due to inadvertence or to some other sufficient cause," or "is not of a nature to prejudice the position of creditors or shareholders," or where it is "just and equitable to grant relief," on such terms as the court thinks just. The remedy for a missed charge registration is an application to court, not a late filing.

Read the table as a diligence list, not a ranking: before advancing, ask which of the first four routes a competitor could still use, then put the last two — your own lapse and your own borrower's name change — into a calendar. In England the list is shorter but sharper, because the 21-day rule at s.859A and the fixed-versus-floating characterisation do most of the work and the intercreditor agreement does the rest.

Security over shares, an account, a receivable, an asset

"We are secured" means nothing until you say secured over what, because each collateral type is created, perfected and enforced under its own rules — and the governing law of the loan does not choose those rules. Property questions follow the lex situs (the law of the asset's location or, for shares, usually the company's place of incorporation), while the loan contract chooses its own law only for the contractual claim.

• Shares. Security over shares in an English company is typically a charge over the shares plus deposit of the share certificate and a signed but undated stock transfer form, registered at Companies House; but a share charge over a Luxembourg or Cayman company is governed by that jurisdiction's law and often needs registration in the company's own share register to bind third parties. An English-law share-charge document over foreign shares can be perfectly valid as a contract and useless as security. This is the direct link to securities custody: where shares are held through a custodian or nominee, the lender's rights run through the custody chain, and control of the securities account — not paper — is often what perfects the security.
• Bank account. A charge over a deposit account is only reliable if the lender has control: in the US, control over a deposit account (a control agreement with the bank, or the lender being the bank) is the perfection method and beats a filing; in England, "account control" and whether the charge is fixed or floating turn on whether the borrower can still draw on the account. An account the borrower operates freely secures very little.
• Receivable. Security over receivables (trade debts, rents, fund distributions) is created by assignment or charge, but its value depends on notice to the account debtor and, in England, squarely on the Spectrum Plus control question. Fund-level lending secured on undrawn commitments and the right to call capital is the specialist version of this — set out in fund finance and capital calls — where the collateral is a receivable (the capital-call right) rather than the portfolio.
• Physical / financial asset. A building, an art collection, a securities portfolio or a yacht each has its own perfection register and its own enforcement route. Lending against a marketable securities portfolio (lombard lending) or against an art collection (borrowing against a collection) is easy to perfect and quick to enforce because the collateral is liquid and controllable; lending against real estate (non-resident mortgages) is slow to enforce and jurisdiction-bound.

One family of collateral escapes the charges register altogether. Where the collateral is cash or financial instruments, both parties are non-natural persons, and the collateral is "delivered, transferred, held, registered or otherwise designated so as to be in the possession or under the control of the collateral-taker or a person acting on its behalf," the arrangement is a security financial collateral arrangement under regulation 3(1) of the Financial Collateral Arrangements (No. 2) Regulations 2003 (SI 2003/3226). Regulation 4(4) then disapplies Companies Act 2006 ss.859A and 859H — no Companies House filing and no 21-day guillotine — and regulation 17 lets the taker appropriate the collateral on enforcement "without any order for foreclosure from the courts," whereupon "the equity of redemption of the collateral-provider shall be extinguished." No register and no court is why security over a securities portfolio or a cash account is both cheaper to take and dramatically faster to realise than a charge over a building. Two limits bite in private credit: regulation 3(1)(d) requires that both parties be non-natural persons, so an individual lending to an individual is outside the regime entirely; and the exemption has to be bought with control.

Control again, with a different penalty. In Gray v G-T-P Group Ltd (Re F2G Realisations Ltd) [2010] EWHC 1772 (Ch) (Vos J, 7 May 2010) a declaration of trust over an account holding a retailer's card receipts was attacked by the liquidators as an unregistered floating charge, and the collateral-taker answered that the financial-collateral exemption applied so no registration was needed. Vos J held that control in the Directive and the Regulations means the taker can prevent the provider from using or dissipating the money — administrative control over the account is not enough — and that the arrangement "cannot be regarded as falling within the definition of either a 'security interest' or a 'security financial collateral arrangement' as defined in the Regulations." The charge therefore needed registration, had not been registered, and was void against the liquidators. It is the same question Spectrum Plus asks, with a different penalty: there, weak control cost the lender its fixed-charge ranking; here it cost the lender the registration exemption, and with it the security.

Covenants, default and acceleration

Between drawdown and repayment the lender's control runs through the loan agreement, not the security. Covenants are the borrower's continuing promises — financial ratios (leverage, interest cover, loan-to-value), and undertakings not to incur further debt, grant security to others (a negative pledge), sell assets or change control. Their job is early warning: a covenant is designed to trip before the borrower actually runs out of cash.

An event of default is the contractual trigger that lets the lender act — a missed payment, a breached covenant, insolvency of the borrower, a cross-default to another lender, a material adverse change. This is where borrowers misread their position most badly: a covenant breach is a default even when every payment has been made on time. Breaching a loan-to-value or leverage covenant entitles the lender to call an event of default, demand information, freeze further drawings and — critically — accelerate.

Acceleration is the lender declaring the whole loan immediately due, converting a long-dated facility into a demand that is due now. It is the gateway to enforcement, but it is only a demand: acceleration does not transfer any asset or any title. It resets the clock and, in most security documents, is the condition that makes the security enforceable.

Enforcement and the limits on it

Enforcement is the step people assume is automatic and is not. What a lender may do, how fast, and against whom, depends on the asset, the security type and whether insolvency has begun.

In the United States, Article 9 gives a secured party unusually direct remedies. Under UCC § 9-609 it "may take possession of the collateral" after default, and may do so "without judicial process, if it proceeds without breach of the peace" — the famous American self-help repossession. But UCC § 9-610 requires that "every aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable," and any surplus goes back to the debtor while a deficiency remains owing. Self-help is fast; it is not a licence to dump the asset at any price.

In England, enforcement of a charge usually runs through a receiver or an administrator appointed under the security document, or through the court, and there is no self-help repossession of a company's assets. A floating-charge holder's classic remedy — appointing an administrative receiver — was largely abolished for charges created after the Enterprise Act 2002, replaced by the right to appoint an administrator, whose duty is to the creditors as a whole, not to the appointing lender alone.

Enforcement across borders multiplies the moving parts, and this is where the debtor / guarantor / asset holder distinction becomes concrete. The debtor may sit in one country, the guarantor in a second, and the asset holder — the entity that actually owns the shares, account or building the lender wants to sell — in a third. Each is reached under its own law: enforcing the guarantee is a contract claim, possibly needing a court judgment recognised abroad; enforcing the security is a property claim under the lex situs; and if any of them is insolvent, a collective process overrides both. Cost and timing are not marginal: a clean US self-help sale can take weeks, while enforcing an English-law charge over a building in a third country through local courts can take years and consume a meaningful fraction of the recovery in fees. A term sheet that promises "security over group assets" without naming the entity, the asset's location and the enforcement route is promising a right whose price is unknown.

Insolvency: what a security interest is really worth

Insolvency is the test the whole structure is built for, and it is where paper security meets its limits. Three mechanisms cut into a lender's position, and they are the reason "we are secured" is a claim to be verified, not assumed.

A moratorium can freeze enforcement. Once an English company enters administration, Insolvency Act 1986 Schedule B1 paragraph 43 provides that "no step may be taken to enforce security over the company's property" except with the administrator's consent or the court's permission, and no legal process may be started or continued. A secured lender that has not enforced before the administrator is appointed may find its remedies suspended while the administrator pursues a rescue or a going-concern sale. Perfection preserves priority; it does not guarantee timing.

Prior transactions can be unwound. Security granted shortly before insolvency, or granted for an old debt without new value, is vulnerable to being set aside as a preference, a transaction at an undervalue or (for floating charges) an invalid floating charge — the detailed grounds, look-back periods and who bears the burden belong to insolvency law and the avoidance of prior transactions. A lender who perfected late, or took security only once the borrower was already in trouble, may lose it in the very event it was designed for.

The waterfall reorders everyone. As the priority map above shows, a floating-charge lender ranks behind the practitioner's costs, preferential creditors and the prescribed part; a structurally subordinated lender ranks behind every creditor of the entity that holds the assets, however senior its documents look at the holding-company level. Insolvency is where structural subordination stops being an abstraction and becomes the order in which cash is paid out.

The tax treatment of interest and the regulatory question of who may lend (fund-lending licences, borrower-side withholding, and the perimeter of regulated credit) turn on the lender's identity and jurisdiction and are handled with the relevant fund, holding and tax owners rather than here — this page is about what the security is worth, not what the loan costs or who is allowed to make it.

When the borrower files: moratorium, plan and the look-back clock

The section above is about ranking. A formal process attacks three other things: the lender's timing (when it may enforce at all), the valuation of its collateral (how much of its claim counts as secured), and its past (whether the security survives a look-back). England and the United States answer each differently, and a cross-border facility meets both.

England: the standalone moratorium and the restructuring plan

Administration is no longer the only freeze. The Corporate Insolvency and Governance Act 2020 inserted a free-standing Part A1 moratorium into the Insolvency Act 1986 (ss.A1–A54) with effect from 26 June 2020. Its initial period is 20 business days beginning with the business day after it comes into force (s.A9(2)), extendable by the directors, with creditor consent, or by the court. During it, s.A21(1)(c) provides that "no steps may be taken to enforce any security over the company's property" except with the permission of the court, and s.A21(3) blocks permission sought with a view to obtaining "the crystallisation of a floating charge." Two carve-outs survive: steps to enforce a collateral security charge within the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (SI 1999/2979), and steps to enforce security created or arising under a financial collateral arrangement within SI 2003/3226. A lender secured on cash or securities under a financial collateral arrangement can therefore keep enforcing while a charge over the same company's plant cannot — the second reason, after the registration exemption and appropriation, why financial collateral is a different asset class in law and not only in liquidity.

Two provisions decide how a lender should behave inside a moratorium, and they point in opposite directions. First, the loan is not frozen on the borrower's side: s.A18(3)(f) excludes "debts or other liabilities arising under a contract or other instrument involving financial services" from the pre-moratorium payment holiday, so the facility must still be serviced. Second, if a winding up begins before the end of the period of 12 weeks beginning with the day after the moratorium ends, s.174A makes moratorium debts and priority pre-moratorium debts payable out of the company's assets "in preference to all other claims" — ahead of the practitioner's other costs, preferential creditors and the floating charge. But the section carves the lender's own instinctive weapon out of that priority: s.174A(3)(c)(iii) excludes "relevant accelerated debt," defined as pre-moratorium debt that fell due during the relevant period "by reason of the operation of, or the exercise of rights under, an acceleration or early termination clause in a contract or other instrument involving financial services." Accelerate inside a moratorium and the accelerated amount drops out of the super-priority the section would otherwise have conferred on it.

Cram down has limits. A restructuring plan under Part 26A of the Companies Act 2006 (ss.901A–901L) lets the court sanction a compromise over the objection of an entire dissenting class — the cross-class cram down in s.901G — which makes it the most powerful instrument a distressed borrower can point at a secured lender. In Strategic Value Capital Solutions Master Fund LP v AGPS BondCo Plc [2024] EWCA Civ 24 (Court of Appeal, 23 January 2024, case CA-2023-000914; Snowden LJ, with Nugee LJ and Sir Nicholas Patten agreeing) the court allowed the appeal and set aside the order sanctioning the plan. The plan preserved the original sequential maturities of the different series of notes, leaving later-dated noteholders bearing materially more risk than earlier ones; the Court of Appeal held that by doing so it "departed in a material respect and without justification, from the scheme of pari passu distribution of the assets of the Group to Noteholders that would have applied in the Relevant Alternative," and that the judge had erred in principle in exercising the discretion under ss.901F and 901G to impose the plan on the dissenting class. Equal-ranking creditors may still be treated unequally under a plan, but the proponent must show a proper basis for it — which is why a dissenting lender's strongest argument is usually the horizontal comparison with its own class, not the vertical one against liquidation.

United States: the stay, the valuation and the credit bid

A Chapter 11 petition stops enforcement automatically. 11 U.S.C. § 362(a)(4) stays "any act to create, perfect, or enforce any lien against property of the estate" — no notice, no application, no discretion at the moment it takes effect.

The collateral is then valued, and the valuation, not the loan balance, fixes how much of the lender is secured. Under § 506(a)(1) an allowed claim secured by a lien "is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property … and is an unsecured claim to the extent that the value of such creditor's interest … is less than the amount of such allowed claim." An undersecured private-credit lender is split in two on the day of the valuation hearing: a secured claim up to the collateral value, and an ordinary unsecured claim for the shortfall.

That is why the credit bid matters. Section 363(k) lets the holder of a lien on property being sold "bid at such sale" and, if it buys, "offset such claim against the purchase price" — the lender bids its own debt instead of cash, which puts a floor under the sale price of its own collateral.

The floor cannot be drafted away. In RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639 (2012) (Scalia J, decided 29 May 2012) the debtors proposed a plan that would auction the lender's collateral free and clear of its lien while denying it the right to credit-bid, relying on the "indubitable equivalent" limb of § 1129(b)(2)(A)(iii). The Supreme Court held that debtors "may not sell their property free of liens under § 1129(b)(2)(A) without allowing lienholders to credit-bid, as required by clause (ii)": the specific provision governs the general one. For a secured lender the case answers a recurring proposal — a fast, court-approved sale to a friendly buyer at a price the lender considers too low is not available if the lender can bid its debt.

The look-back clock

Both systems reopen the recent past, and the periods are short enough to catch ordinary refinancings. In England, a preference or a transaction at an undervalue is attackable if entered into within 2 years of the onset of insolvency where the counterparty is connected with the company, or within 6 months for an unconnected preference (Insolvency Act 1986 s.240(1)) — and then only if the company was unable to pay its debts at the time or became unable to do so in consequence (s.240(2)). A floating charge has its own rule: under s.245(3) it is created at a relevant time if granted within 12 months of the onset of insolvency, or 2 years where the chargee is connected with the company, and s.245(2) then invalidates it except to the extent of money paid, goods or services supplied, or debt discharged "at the same time as, or after, the creation of the charge." A floating charge taken to secure yesterday's unsecured debt is, to that extent, simply void. In the United States § 547(b)(4) sets the preference window at 90 days before the petition, extended to one year where the creditor was an insider at the time of the transfer.

Which system's clock applies, and which court gets to run it, is itself contested in a cross-border group: that allocation, and recognition of the foreign process, sit with cross-border insolvency and the unwinding of prior transactions, while turning a judgment on the guarantee into money in a third country sits with enforcement of judgments and awards.

Four situations where the label and the reality diverge

The following situations are illustrative; the facts are simplified to isolate one mechanism each.