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The order of repayment. In the event of bankruptcy, senior debt must be repaid before subordinated debt is repaid.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
A rule stating that, in liquidation, certain creditors must be satisfied in full before any other creditors receive any payments. That is, in the liquidation of a company, the absolute priority rule states that holders of secured debt must be paid before holders of unsecured debt. Holders of unsecured debt have precedence over preferred shareholders, and, finally, preferred shareholders must be satisfied before common shareholders.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
The condition or status of a security that has priority over other securities by the same issuer with respect to the payment of income (that is, interest or dividends) and repayment of principal. As an example, for the same issuer, bonds have seniority over preferred stock and preferred stock has priority over common stock. See also junior security.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.