Senior Bank Loan


DEFINITION of 'Senior Bank Loan'

A debt financing obligation issued by a bank or similar financial institution to a company or individual that holds legal claim to the borrower's assets above all other debt obligations. The loan is considered senior to all other claims against the borrower, which means that in the event of a bankruptcy the senior bank loan is the first to be repaid, before all other interested parties receive repayment.

BREAKING DOWN 'Senior Bank Loan'

Senior bank loans are usually secured via a lien against the assets of the borrower. At the time the loan is made, there typically tend to be no other existing liens on the borrower's assets, or at least not on any of the assets being secured by the senior bank loan. Thus, if the borrower should enter a state of bankruptcy in the future, the assets used to secure the senior bank loan must be used to repay the senior bank loan before other creditors, preferred stockholders or common stockholders receive any payment.

  1. Lien

    The legal right of a creditor to sell the collateral property ...
  2. Senior Debt

    Borrowed money that a company must repay first if it goes out ...
  3. Absolute Priority

    A rule that stipulates the order of payment - creditors before ...
  4. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  5. Blanket Lien

    A lien that gives the right to seize, in the event of nonpayment, ...
  6. Maturity

    The period of time for which a financial instrument remains outstanding. ...
Related Articles
  1. Mutual Funds & ETFs

    Top 3 Bank Loan ETFs

    Explore analyses of the top three exchange-traded funds, or ETFs, that track the senior bank loan market, and learn about their characteristics and suitability.
  2. Bonds & Fixed Income

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  3. Options & Futures

    Common Bond-Buying Mistakes

    Avoid these errors made daily in bond portfolios everywhere.
  4. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  5. Mutual Funds & ETFs

    Top 3 Inflation Protected Bond Mutual Funds

    Learn about the characteristics and suitability of the top inflation-protected bond mutual funds, and how investors can use these funds to their advantage.
  6. Mutual Funds & ETFs

    Top 3 Emerging Markets Bond Mutual Funds

    Discover detailed analysis of the top three mutual funds offering exposure to the emerging markets bonds, and learn about the suitability of these funds.
  7. Economics

    What is Fractional Reserve Banking?

    Fractional reserve banking is the banking system most countries use today.
  8. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  9. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  10. Investing Basics

    Are ETFs the Best Way to Diversify with Bonds?

    Are bonds safe or risky right now? It depends on the type of bond and how you invest in them.
  1. Are high yield bonds a good investment?

    Bonds are rated according to their risk of default by independent credit rating agencies such as Moody's, Standard & ... Read Full Answer >>
  2. What are the maximum Social Security disability benefits?

    The maximum Social Security disability benefit amount for a single eligible person in 2015 is $1,165 per month, but you can ... Read Full Answer >>
  3. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  4. What is a 'busted' convertible bond?

    In finance, a convertible bond represents a hybrid security that offers debt and equity features and risks. While a convertible ... Read Full Answer >>
  5. How does investment banking differ from commercial banking?

    Investment banking and commercial banking are two primary segments of the banking industry. Investment banks facilitate the ... Read Full Answer >>
  6. Why do commercial banks borrow from the Federal Reserve?

    Commercial banks borrow from the Federal Reserve primarily to meet reserve requirements when their cash on hand is low before ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!