Subordination clause


Also found in: Legal.

Subordination clause

A provision in a bond indenture that restricts the issuer's future borrowing by subordinating future lenders' claims on the firm to those of the existing bondholders.

Subordination Clause

A clause in some contracts for debt stating that in the event of bankruptcy or liquidation, the debt in the contract will take priority over all other debts. This protects the creditor in the event that the debtor defaults. It is most common in mortgages and bonds. See also: Absolute Priority Rule.
References in periodicals archive ?
To assess the impact of a subordination clause, you first need to understand the general lease priority rules.
From the lender's perspective, the desire for subordination clauses makes sense.
Unfortunately, property owners are often "stuck between a rock and a hard place." Lenders may insist on subordination clauses while prospective tenants are strongly opposed to them.
in today's struggling real estate market, it's important for you to understand the impact of subordination clauses on both tenants and lenders.
Specifically, we issued Euro-Yen convertible bonds with warrants due 2014 (with subordination clause) by third-party allotment and Euro-Yen permanent preferred securities, with the right of conversion into common stock, through our overseas subsidiary.
Note: As for the capital increase, please refer to point entitled "Issuance of new shares and sale of shares; issuance by third-party allotment of Euro-Yen convertible bonds with warrants due 2014 (with subordination clause); and issuance by an overseas special-purpose subsidiary of Euro-Yen permanent preferred securities with the right of conversion into common stock."
Unless a ground lease has a subordination clause, the landlord would receive a windfall if the tenant defaulted on the land lease.
Other more site specific factors include local market demand; the landlord security positions relative to the improvement value or subordination clause; and the specific terms of the ground lease, particularly the rental adjustments.
In the past, landlords were in such a dominant position that most tenants (other than the strongest of anchor tenants) were forced to accept the standard subordination clause, and until recently most tenants did not think much about the possibility of a mortgage foreclosure on the shopping center.
These days, however, tenants must consider the risk of entering into a lease without providing for something more than the standard subordination clause without modification.
Depending upon the bargaining strength of the tenant, the standard subordination clause can be modified in several ways to be more palatable to the tenant.