Why do lenders demand upstream and cross-stream guarantees, and how do they address structural subordination?

Structural subordination is the problem that a lender to a holding company ranks behind the creditors of the operating subsidiaries, because the holdco only owns equity in the subs — and equity is the most junior claim, so in a sub's insolvency the holdco (and thus its lenders) gets only what's left after the sub's own creditors are paid. Operating-company creditors are 'structurally senior' to holdco lenders even without contractual subordination. Lenders address this by taking guarantees and security across the group: upstream guarantees (operating subsidiaries guarantee the parent's/holdco's debt) put the lender on par with the subs' own creditors by giving a direct claim against the operating entities where the assets and cash actually are; cross-stream guarantees do the same between sister companies. They also take share pledges and asset security. The constraints: legal limits on guarantees (financial-assistance rules, corporate-benefit/capital-maintenance requirements, fraudulent-conveyance/Insolvenzanfechtung risk if a sub guarantees with no benefit), so guarantees are often limited by 'guarantee limitation language'. In a restructuring, who has upstream guarantees from which entities is decisive for where each creditor actually ranks against the operating assets.