Senior Debt


DEFINITION of 'Senior Debt'

Borrowed money that a company must repay first if it goes out of business. Companies have a number of options for obtaining financing, including bank loans and the issuance of bonds and stocks. Each type of financing has a different priority level in being repaid if the company decides to liquidate. If the company goes under, the holders of each type of financing have different levels of rights to the company's assets.


If a company goes bankrupt, senior debtholders, who are often bondholders or banks that have issued revolving credit lines, are most likely to be repaid, followed by junior debt holders, preferred stock holders and common stock holders. Senior debt is secured by collateral, and that collateral can be sold to repay the senior debt holders. As such, senior debt is considered lower risk and carries a relatively low interest rate. Even though senior debtholders are the first in line to be repaid, they will not necessarily receive the full amount they are owed in a worst-case scenario.

  1. Bond

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  2. Junior Debt

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  3. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  4. Absolute Priority

    A rule that stipulates the order of payment - creditors before ...
  5. Senior Security

    A security that ranks above another security in the event of ...
  6. Bankruptcy

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