A security package is the set of liens and share pledges over a borrower group’s assets, perfected to give lenders priority when things go wrong. A guarantee is a promise by subsidiaries or a parent to pay the borrower’s debt if the borrower does not. Neither tool creates value where there is none, and neither overrides hard limits set by tax, corporate law, or insolvency rules.
This guide explains how lenders in the United States and Europe use security and guarantees to build coverage, why the differences matter for pricing and timing, and how sponsors can simplify execution without sacrificing real enforcement leverage.
Why the US-Europe split matters for pricing and timing
Across both regions, lenders chase the same payoff: collateral coverage, structural seniority, and enforcement leverage. The United States reaches those goals with standardized filings and cash control. Europe gets there selectively, jurisdiction by jurisdiction, with more board process and more legal limits. Because of that gap, deals diverge on coupon, covenants, and time to close.
Stakeholder incentives and practical trade-offs
- Lender priority: Creditors want clean attachment, timely perfection, and an enforcement path that does not run through three courts and five registries. The impact is higher close certainty and better recovery odds.
- Sponsor speed: Sponsors value fast signing and operational flexibility. They trade away difficult collateral steps and use agreed security principles in Europe to cap friction. The impact is lower cost and fewer post-closing surprises.
- Board guardrails: European boards must evidence corporate benefit and respect capital maintenance. That generates limitation language that can shrink upstream and cross-stream support. The impact is a narrower guarantor net and more reliance on intercompany economics and covenants.
Legal frameworks that shape security and guarantees
United States: Article 9 plus cash control
Article 9 of the Uniform Commercial Code covers most personal property. Attachment requires value, rights in the collateral, and an authenticated security agreement; perfection usually takes a filing in the debtor’s state. Deposit accounts perfect only by control; securities and securities accounts prefer control for priority. IP and fixtures need specialized steps. A New York law collateral agent is standard. Bankruptcy introduces automatic stay, avoidance risk, and plan dynamics; Article 9 remedies require commercial reasonableness. The result is broad coverage, fast perfection in days, and predictable enforcement outside bankruptcy.
Europe: asset-by-asset, country-by-country
There is no Article 9 analogue. You take security asset-by-asset, country-by-country, and each jurisdiction adds time, fees, and quirks.
- England and Wales: Fixed and floating charges depend on control. After Spectrum Plus, operating cash usually sits under floating charges. Share charges are common, and the Financial Collateral Arrangements Regulations (FCAR) can allow appropriation on enforcement.
- Civil law systems: Pledges, assignments, and mortgages vary. Germany uses global receivables assignments and land charges; France uses Dailly receivables and reformed pledges that can allow appropriation; the Netherlands relies on disclosed and undisclosed pledges and notarial share pledges. Parallel debt or statutory security agents stand in for common-law trusts.
Corporate law constraints are the big European swing factor. Financial assistance limits continue for public companies and their subsidiaries. Corporate benefit and capital maintenance often cap upstream and cross-stream guarantees to distributable reserves or demonstrable benefit. In the U.S., fraudulent transfer law is the main limiter and is applied after the fact. The result is narrower European coverage up front, and broader U.S. coverage tested if a deal stumbles.
Guarantees in practice: scope, limits, and tax
United States: wide net with targeted carve-outs
“All domestic material subsidiaries” is the baseline for guarantees and security. Foreign subsidiaries are often excluded or limited to manage tax and foreign law costs. Upstream and cross-stream guarantees can be challenged as fraudulent transfers, so parties rely on solvency certificates and upstream value to support reasonably equivalent value. Section 956 concerns linger in some structures, so legacy 65 percent pledges of voting stock of first-tier CFCs still appear where investor tax profiles demand it. Diligence on shareholder mix avoids surprises.
Europe: agreed principles drive coverage
Guarantee coverage tracks “all material obligors within agreed security principles.” Those principles carve out assets and jurisdictions where cost, illegality, tax, or financial assistance issues bite. UK private companies are free from financial assistance, but public company groups are not. France, Luxembourg, Spain, and others keep restrictions, sometimes with whitewash routes. Corporate benefit and capital maintenance caps tie liability to distributable reserves in places like Germany, Italy, and the Nordics. Cross-border tax rules can also treat cross-stream support as a constructive distribution if fees are off-market, so sponsors often avoid explicit fees and manage via covenants and intercompany balances.
Asset-level security: where control is real
Equity interests: fast path to control
In the U.S., corporate shares are securities under Article 8. Perfection by control through certificated shares and stock powers or control agreements provides a strong equity path with fast execution. LLC and LP interests can be opted into Article 8 to gain similar benefits. In England and Wales, equitable share charges with undated transfers are common, and FCAR can allow appropriation. In civil law jurisdictions, notaries, register entries, and notices add cost and time, but payoff is direct control at the right level when perfected properly.
Bank accounts and cash: the real fulcrum
Cash control often dictates leverage in a downturn. In the U.S., deposit accounts perfect only by control via DACAs or agent-held accounts. Asset-based loans use springing dominion and cash sweeps tied to availability, which gives immediate leverage when triggers hit. In Europe, there is no control perfection concept. Lenders take account charges, chase bank acknowledgments, and rely on sweeps and blocks. Fixed charges require tight withdrawal limits, so you often end up with floating charges, and account bank set-off rights loom large.
Receivables: enforceable but process-driven
In the U.S., a filing perfects security over receivables, and notice is not required. ABLs notify for collections control and priority. In Europe, mechanics differ. France’s Dailly regime supports bulk assignments with sturdy enforceability. Germany’s global assignment is effective but must navigate anti-assignment clauses and supply chain conflicts. Dutch undisclosed pledges need periodic filings to stay continuous; disclosure improves priority but can annoy customers. The upshot is enforceable coverage, but cadence and contract terms drive control.
Inventory, equipment, IP, and real estate: cover what moves cash
In the U.S., filings cover inventory and equipment, PMSIs can prime with notice and filing, IP liens require USPTO or USCO recordals, and real estate uses mortgages or deeds of trust with county filings. In Europe, inventory and equipment pledges vary by country, IP pledges need registry filings, and real estate takes time and notaries. As a result, real estate is often excluded unless material. Focus on assets that drive cash conversion.
Intercreditor architecture and enforcement leverage
United States: agent-led playbook
A collateral agent holds all liens. First and second lien loans or an ABL/term split allocate priority, proceeds, and control. ABLs typically take first priority in receivables, inventory, and cash, with term lenders first on the rest. Standstills run 90 to 180 days with defined access rights. The playbook reduces surprises in stress and makes intercreditor agreements and lien subordination predictable.
Europe: LMA-style governance
A security agent holds collateral for a shifting lender base via trust (English law) or parallel debt (civil law). LMA-style intercreditors put super senior RCFs first in enforcement proceeds and payments, with hedging alongside on a net basis. Standstills give RCFs first call on liquidity. Term lenders often trade speed for order, which also influences pricing and whether sponsors prefer unitranche loans for simplicity.
Mechanics that move outcomes
- Cash control: U.S. ABLs flip to dominion on borrowing base triggers and can sweep overnight via DACAs. European sweeps depend on account bank cooperation and local law. U.S. is faster; Europe is workable with planning.
- Waterfall discipline: U.S. waterfalls allocate by lien and class under agent control. LMA deals hard-wire super senior first, then hedging, then term or unitranche, with turnover where leakage happens. Address trapped cash and FX mismatches explicitly.
- Transfers and KYC: U.S. typically runs on majority control with sacred rights; Europe follows LMA thresholds and borrower caps. KYC and sanctions checks set the pace for secondary liquidity.
Documentation and execution risk you can plan for
- Credit perimeter: The credit agreement defines scope and governing law. In Europe, agreed security principles set what gets pledged and what does not. Set the perimeter early to avoid week-12 surprises.
- Guarantee logistics: U.S. guarantees are omnibus domestic forms. Europe needs local forms with limitation language and board approvals; whitewash or shareholder steps can become conditions precedent.
- Security paperwork: The U.S. uses all-assets security agreements with IP and fixture filings. Europe is per-asset and per-country, including English debentures and share charges; French pledges and Dailly; German assignments and land charges; Dutch notarial pledges and share pledges. Build a granular CP checklist, or missed formalities will erode coverage.
- Opinion strategy: U.S. deals take enforceability and perfection opinions in the state of organization and real estate states. Europe requires capacity, benefit, assistance, and perfection opinions everywhere you take security. Treat opinions as gating, not afterthoughts.
Enforcement routes: what actually happens
United States: Article 9 remedies and Chapter 11 dynamics
Article 9 allows private or public sales, strict foreclosure, and IP licensing; the agent can credit bid. Bankruptcy pauses action and shifts leverage to adequate protection, DIP priming risk, and plan negotiations. Lien subordination is generally respected, as is payment subordination. Remedies are predictable, but Chapter 11 reshuffles bargaining power.
England and Wales: administration, receivers, and FCAR
A qualifying floating charge holder can appoint an administrator; a fixed charge holder can appoint a receiver. Share charges can be enforced via appropriation under FCAR with pre-agreed valuation. Where FCAR applies, lenders gain rapid equity control and a strong path to a controlled sale.
Civil law jurisdictions: formal, but workable
France allows appropriation (pacte commissoire) and sales for certain pledges; Dailly lets the bank collect. Germany uses public auction or private sale for pledges, with debtor-friendly notices and insolvency hardening periods. The Netherlands can run private sales with court approval or agreement, with undisclosed pledges becoming disclosed on enforcement. Expect more time and plan to manage customer optics.
Comparisons, alternatives, and decision rules
U.S. loans deliver blanket liens and broad guarantees with low friction. Article 9 plus deposit account control keeps enforcement leverage high at modest cost. European loans deliver targeted depth where law supports it. Super senior RCFs and FCAR share charges can create real control even without U.S.-style dominion.
If collateral is weak or scattered, price structural subordination honestly. Consider using holdco PIK notes, NAV facilities, or second lien loans where they fit the security packages and guarantees you can deliver. In ABL-heavy structures, bone up on asset-based lending mechanics; for covenant strategy, revisit equity cure provisions. Fund-level liquidity options like NAV financing can also right-size risk at the platform level.
Key risks and edge cases to underwrite
- Corporate benefit failure: Weak board process or thin benefit can void support in Europe or expose directors. Mitigate with detailed minutes, caps linked to reserves, and clean intercompany terms.
- Financial assistance: Public-company groups face real limits; any whitewash process takes time. This is closing certainty risk, not just paperwork.
- Floating charge leakage: Preferential creditors and the prescribed part dilute recoveries in the UK; slippage in control can recharacterize fixed as floating.
- Perfection gaps: Missing DACAs in the U.S. or Companies House filings within 21 days in the UK punch holes in priority. Track deliverables relentlessly.
- Parallel debt sensitivities: Now better recognized across Europe, but still opinion-sensitive in some courts. Buy the right opinion comfort.
- Hardening periods: Preferences and undervalue rules can unwind late-granted security; intercompany accounts are frequent targets.
- Asset-level traps: Landlord liens, retention of title, anti-assignment clauses, government receivables, and concessions can sit ahead of lenders.
- Crypto and digital assets: The latest UCC amendments help in the U.S., but adoption is uneven and Europe is fragmented. Most deals exclude or treat them generically.
Execution timelines that usually hold
- Strategy and mapping: 1 to 2 weeks to identify material entities and assets, appoint local counsel, and choose the security agent. This avoids rework downstream.
- Document production: 3 to 6 weeks to run main facilities and intercreditor in parallel with local security. Parallel processing compresses the critical path.
- Perfection steps: 2 to 8 weeks by jurisdiction. U.S. filings and DACAs can land in days; European notaries, register entries, and bank acknowledgments drive the clock.
- Opinions and closing: 1 to 2 weeks after deliverables line up. Confirm statutory filings and log post-closing items to protect priority.
Fresh angle: the six-week control test and a red-flag map
Use one plain test before you price: if you cannot put core operating equity, receivables, and cash under reliable control within six weeks of signing, either adjust leverage or change structure. Paper does not collect receivables; bank blocks and share transfers do.
- Red-flag map: Flag any entity where financial assistance applies, DACAs are unavailable, receivables contracts prohibit assignment, or account banks resist acknowledgments. These are your gating items.
- Playbook items: Pre-wire FCAR eligibility, pre-negotiate DACAs with account banks, opt LLC interests into Article 8, and set agreed security principles by country. A two-page matrix can save two weeks.
- Back-up levers: Where security is thin, favor unitranche documentation with tight covenants, add distribution traps, and consider incremental capacity at a structurally senior holdco with holdco PIK notes.
To summarise
U.S. deals deliver broad coverage with filing plus control and a clear enforcement playbook. Europe delivers targeted, enforceable coverage if you respect corporate benefit, financial assistance, and local perfection rules. Map the guarantor net early, focus on equity and cash control at the operating level, and use intercreditor architecture to keep the waterfall orderly. If you cannot achieve real control in six weeks, right-size leverage, pivot to products that match the collateral you can deliver, and lean on the agreed principles that make European execution achievable.
For more detail on regional nuances, compare the structures and limits described here with the specifics covered in security packages and guarantees across European mid-market deals.