Question $(1)$

You are being asked to provide a loan to the main holding company within a group. Although this company doesn't trade, it has a number of

profitable subsidiaries and consequently receives good dividend income $-$ sufficient to comfortably service the proposed loan. What is the best

way to mitigate the potential risks of lending in this group structure?

Lend to the holding company and take the subsidiary company guarantees and shares as security.

Make a loan or loans directly to the subsidiary companies, securing their assets and cross$-$guarantees as support.

Lend to the holding company and use strong restrictive covenants or subordination agreements to exert the necessary control.