Subordinated Debt

Subordinated debt

Debt over which senior debt takes priority. In the event of bankruptcy, subordinated debtholders receive payment only after senior debt claims are paid in full.

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Subordinated debt. Subordinated debt generally refers to debt securities that have a secondary or lesser claim to the issuer's assets than more senior debt, should the issuer default on its obligations.

In fact, there are also levels of subordinated debt, with senior subordinated debt having a higher claim to repayment than junior subordinated debt.

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Subordinated Debt

What Does Subordinated Debt Mean?

A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings; sometimes called a junior security or subordinated loan.

Investopedia explains Subordinated Debt

In the case of default, creditors with subordinated debt would not get paid until after the senior debtholders were paid in full. Therefore, subordinated debt is more risky than unsubordinated debt.

Related Terms:
• Bankruptcy
• Bond
• Debt
• Debt Financing
• Preferred Stock