Securing the debt obligation by taking a property
interest in one or more of the debtor’s assets prior to insolvency enables a
creditor to achieve this kind of “super-priority.” “Security must stand up on
insolvency which is when it is needed most.”18
18 P. R. Woods, Comparative law of security and guarantees (Sweet & Maxwell, London: 1995) at 3.
Hence, security is more important at the end than it is at the beginning of a financing relationship.
It isthe creditor’s concern (at the beginning) that it can assure payment ahead of
all other creditors in the event of default, insolvency or bankruptcy of the
debtor thereby minimising its risk of loss (at the end). Such security minimizes
these risks because it enables the creditor to apply the liquidated value of the
encumbered assets in satisfaction of the debtor’s obligation before all other
creditors.