The billionaire pledged his personal investments in four of his firm’s hedge funds as additional collateral for a credit line Paulson & Co. has had with HSBC Bank USA for at least five years, according to a filing last month with the state of New York. The holdings will also serve as guarantee for a new personal line of credit for Paulson. 

Paulson is using his wealth to back the firm’s borrowings after investment losses and client defections cut assets by more than half from their peak.The decline is eroding the fees Paulson & Co. pledge as collateral for theoriginal credit line, and on which the firm relies to pay expenses and compensate employees.

“If the company’s financials don’t support the credit line, you get somebody like that to provide a credit enhancement,” said Thomas Leslie, an attorney at Greenberg Traurig LLP who has represented issuers of loans secured by hedge fund interests. […]