Usual Luxembourg security package

Luxembourg is one of the leading domiciles worldwide for international investment portfolio acquisition vehicles.

Acquisition financing are usually secured against the assets and cash flows of the target company as well as of the buyout vehicle.

In practice, given that a Luxembourg holding company generally does not have any operational activities, shares, receivables and cash on bank are the most important assets to cover.

Two priority issues arise between creditors of a common debtor:

So, you’re a lender who has a perfected security interest in a large pile of limestone aggregate at a cement plant. Another lender has a perfected security interest in a pile of clay at that same plant. The aggregate and clay are crushed, and then ground and blended with other ingredients, before being heated in a kiln to produce a substance called “clinker”.

Lenders should be aware that a broad definition of “wages” owing to employees of a borrower/customer in bankruptcy or receivership can take priority over what a lender might otherwise believe is its “first ranking charge” against the borrower.