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Structural Subordination

A subordination of mezzanine capital that is defined by the borrower group’s corporate structure. For example, this type of subordination would arise when the structurally subordinated debt is owed only by a holding company, while the senior debt is owed by an operating company (one that generates all of the cash flows). Lenders to the holding company can only be repaid from the operating company’s revenues after the operating company lenders have been repaid.


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