While notable doctrine in the 1990s considered the relevance of multiple security interests in the same asset to be low in Switzerland 1 , junior and senior ranking debt as well as several financing tranches with different priorities are common in (international) financing transactions, allowing for a categorisation of lenders into different creditor groups. Differentiations are made, inter alia, in interest rates and payments as well as repayments of principal and security interests. Most of this is usually covered in an overriding foreign law governed credit agreement or intercreditor agreement. However, if there are security interests governed by local law, the relevant agreements need to be aligned with the finance documents and mirror the different ranks.

This article focuses on the different rankings of collateral under Swiss law and highlights important items for consideration.

In a junior or lower ranking right of pledge, the same asset is subject to two or more rights of pledge, i.e. (i) the pledgor creates and perfects a right of pledge over an asset that it has already...