Refers to debt financing raised at a holding entity (“Holdco”) sitting above operating companies, which does not have any direct access to cash generated as a result of regular business operations.
Holdco Financings entail additional risk vs Opco Financings as (1) Servicing the interest on Holdco debt depends on the ability of an Opco entity to upstream cash to the Holdco; and (2) Holdco Financing is generally subordinated or junior to any debt in the Opco, therefore increasing the risk of any recovery in case of an insolvency or enforcement scenario.
See also: Opco Financing, Structural Subordination