Junior Security

Junior security

A security that has a lower-priority claim on a company's assets and income than a senior security. For example common stock is junior to preferred stock.

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Junior Issue

A security that has a lower priority compared to another in the event of liquidation. That is, if a company goes bankrupt and is liquidated, holders of secured debt must be paid before the holders of unsecured debt. Holders of unsecured debt must be paid before preferred shareholders, and finally, preferred shareholders must be satisfied before common shareholders. In the forgoing, each security is a junior issue compared to the previous one. See also: Absolute Priority Rule.

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junior security

A security having a subordinate claim to assets and income with respect to another class of security. For example, preferred stock is a junior security compared with a debenture, and a debenture is a junior security compared with a mortgage bond. In general, a junior security entails greater risk but offers higher potential yields than securities with greater seniority.

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Junior security. In the world of bonds, the term junior means having less claim to repayment.

If you own a junior security and the issuing company goes out of business, you have less claim on any assets than an investor who owns a senior security issued by the same company.

But all bondholders, whether they own junior or senior securities, are senior to, or have a greater claim than, holders of preferred stock, who in turn are senior to holders of common stock.

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Junior Security

What Does Junior Security Mean?

A security that ranks lower than other securities in regard to the owner's claims on assets and income if the issuer becomes insolvent.

Investopedia explains Junior Security

When bankruptcy occurs, holders of both preferred shares and debt securities have first claim on the remaining assets. Only after preferred shareholders have been paid back are the remaining assets (if any) divided among common shareholders.

Related Terms:
• Bankruptcy
• Bond
• Common Stock
• Preferred Stock
• Subordinated Debt