Leadenhall Capital Partners LLP v. Advantage Capital Holdings LLC 2026 WL 796177 (4th Cir. 2026)
When a lender is trying to collect on a defaulted loan, it may be tempting to freeze every related party’s assets before judgment. However, this Second Circuit decision is a reminder that equity has limits. In Leadenhall Capital Partners LLP v. Advantage Capital Holdings LLC, Leadenhall lent money to borrower entities under a loan and security agreement secured by the borrowers’ assets, and separate guarantor entities absolutely guaranteed the debt. After Leadenhall concluded the collateral was deficient and accelerated more than $609 million in debt, it sued the borrowers, guarantors, and related parties and obtained a preliminary injunction freezing both borrower and guarantor assets. The guarantors and a competing secured lender appealed, arguing that the district court lacked authority to freeze guarantor assets because Leadenhall had no lien or equitable interest in those assets.
The Second Circuit agreed and vacated the portion of the injunction restraining the guarantors’ assets. Relying on Grupo Mexicano De Desarrollo, S.A. v. Alliance Bond Fund, Inc., the court explained that in an action seeking contractual money damages, a court generally cannot impose a prejudgment asset freeze unless the plaintiff claims a lien or equitable interest in the specific assets to be frozen. Here, although Leadenhall had a first-priority security interest in the borrowers’ collateral, the guarantors had not pledged any collateral of their own. The court rejected Leadenhall’s argument to characterize the guarantors’ obligations as creating a present lien or equitable interest. Instead, the court found that Leadenhall was ultimately seeking payment of money due under a contract, which is a standard legal remedy, not equitable relief tied to particular property.
Because Leadenhall identified no specific guarantor property to which it was entitled and sought no final equitable relief to which the freeze could be appropriate, the district court had erred in its finding.
For lenders, private credit funds, and litigants in distressed-debt cases, this opinion is an important warning that a guaranty is not the same thing as a pledge of collateral. Even when a guarantor has broadly promised to answer for the borrower’s obligations, that promise alone may not let a lender freeze the guarantor’s unencumbered assets before judgment. If the goal is to preserve assets pending litigation, documents need to create an actual security interest, or the claims need to support genuine equitable relief tied to identifiable property. Otherwise, as demonstrated in this case, a court may treat the suit as nothing more than an effort to secure payment of a legal debt.
This post is for informational purposes only and does not constitute legal advice. If you have questions about your specific situation, you should contact a lawyer for assistance. Nothing herein is intended to create any attorney-client relationship between you and DLM LAW.
