junior security

Junior Security

A security that ranks lower than other securities in regards to the owner's claims on assets and income in the event of the issuer becoming insolvent.

Notes:

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, remaining assets (if any) are divided among common shareholders.

See also: Absolute Priority, Bankruptcy, Bond, Junior, Liquidation, Security, Senior Security, Subordinated Debt, Unsubordinated Debt

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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 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.