Subordinated Debt

Subordinated Debt

A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan".

Notes:

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

See also: Absolute Priority, Bankruptcy, Bond, Debt, Default, Junior Security, Loan, Senior Security, Unsubordinated Debt

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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.