A debt that takes priority over other classes of debt such as unsecured or “junior” debt owed by the issuer. Senior debt has an advanced seniority in the issuer’s capital structure than subordinated debt, and also it has priority for payment in case of liquidation. In the event the issuer goes bankrupt and therefore is unable to pay off its obligations, i.e., the debt amount and interest, senior debt has a prioritized right to be repaid before other types of debt receive any payment.
Senior debt is often guaranteed by collateral from which the lender can redeem the debt along with any dues. This covers almost all types of assets, especially loans and revolving credit lines. Senior debt is frequently issued in the form of senior notes, and is also referred to as senior loans.
Comments