Subordinated


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Subordinated

A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt.

Subordinated

Describing a class of security that, in the event of liquidation, is prioritized lower than other classes of security. For example, a subordinated security may be an unsecured loan, which has no collateral. Should the issuer be liquidated, all secured bonds and debts must be repaid before the subordinated security is repaid. A subordinated security carries higher risk but also pays higher returns than other classes. See also: Junior Debt.
References in periodicals archive ?
The study found that existing evidence supports the use of subordinated debt to encourage market discipline.
Unlike conventional loans, which are tied to and determined by asset values, accounts receivable and debt-to-equity ratios, a subordinated loan is based on cash flow, earnings and management's track record.