Credit, as a securityLoan repackaging and private credit notes, issued in Luxembourg
A loan is a contract between two parties. A note is an instrument that clears, settles and sits in a custody account. Most of what we issue is the conversion from the first into the second.
How the money moves
Three structures
Each sits in its own segregated compartment, exposed solely to the credit it holds.
Assignment of an existing claim
A lender holds a claim against a company and wants to realise it, or a group of investors wants to acquire it. The compartment takes the assignment and issues notes against it. The investors hold a security; the borrower keeps dealing with a single creditor.
Existing receivable · Assignment agreement · Pass-through of collections
New facility to a borrower
The compartment raises capital from investors and lends it directly, typically to a company or a project vehicle. Investors receive a coupon set by the facility, and, where the transaction is structured that way, a share of the outcome.
Senior or subordinated · Fixed or floating coupon · Security package as agreed
Portfolios
A pool rather than a single exposure: loan portfolios, CLO positions, or a book of receivables. The compartment holds the pool and issues notes whose cash flows follow it, net of the compartment's costs.
Diversified pool · Defined selection criteria · Cash flows passed through
In plain terms
Why a loan is harder to hold than it looks
A bilateral loan is a contract. It is not an instrument, it has no ISIN, and it cannot be delivered through a settlement system. For the original lender that is rarely a problem. It becomes one the moment anything needs to change.
Bringing in a co-investor, splitting the exposure between several holders, or selling part of it down all require the borrower's consent and a fresh set of documents, usually at the least convenient moment. A bank that is asked to hold the loan in custody for a client will generally decline, because there is nothing to hold.
Repackaging changes the format, not the credit. The compartment holds the loan or the claim, and issues notes against it. The economics are the same, and the credit risk is unchanged: a note wrapped around a weak loan is still a weak loan. What changes is that the exposure becomes transferable, divisible among several investors, and acceptable in an ordinary custody account.
In practice
A claim acquired by investors
A lender held a claim against an operating company. A group of investors acquired it through a compartment and received notes in proportion to their participation.
Club deal on a property company
A loan to a real estate company, funded by a defined group of investors, each holding notes rather than a stake in a holding structure.
Portfolio exposure
CLO positions and loan portfolios held in a compartment, with the cash flows of the pool passed through to noteholders.
Illustrative of structures we issue. No counterparty, pricing or performance information is disclosed.
Collateralised loan obligations
When the pool is tranched
A CLO is a pool of corporate loans financed by notes of different seniority. The loans generate interest and repayments; the notes are paid in order of priority, and losses are absorbed in reverse.
That ordering is the entire product. The senior tranche accepts a lower coupon in exchange for being paid first and absorbing losses last. The equity tranche takes whatever remains after everyone else, which is either a great deal or nothing at all.
A compartment can hold CLO positions acquired on the market, or hold a pool and issue tranched notes against it. In both cases investors hold a security with a European ISIN rather than a participation in a fund.
What the compartment adds
It becomes transferable
A note with a European ISIN clears through Euroclear, Clearstream and SIX. The exposure can be divided, transferred or sold down without renegotiating the underlying contract.
It is ring-fenced
Each transaction sits in its own compartment. Creditors of one have no claim on the assets of another, by statute rather than by contract.
It is administered
Collections, coupon and redemption processing, compartment-level accounting and the annual audit are handled at platform level, not by the investors.
It reaches the client
A private bank will hold a security for its client where it would refuse to hold a loan agreement. For distribution, that is usually the deciding point.
Issuance Configurator
Repackaging a loan or a credit portfolio?
Tell us what the exposure is, its size and who the investors are. We come back with an indicative structure and a timeline.
Open the configuratorNo commitment. Reserved for professional and institutional investors.