A
security that has a lower priority compared to another in the event of
liquidation. That is, if a company goes
bankrupt and is liquidated,
holders of
secured debt must be
paid before the holders of
unsecured debt. Holders of unsecured debt must be paid before preferred shareholders, and finally, preferred shareholders must be satisfied before common shareholders. In the forgoing, each security is a junior issue compared to the previous one. See also:
Absolute Priority Rule.