Senior Notes

DEFINITION of 'Senior Notes'

A debt security, or bond, that takes precedence over other unsecured notes and must be repaid in the event of bankruptcy. Senior notes are relatively secure because of their priority status in the event of liquidation. With this added security comes a reduced interest or coupon rate as compared to junior bonds.

BREAKING DOWN 'Senior Notes'

Unlike senior debt, senior notes are not necessarily secure or backed by assets. That means that the bondholder may not receive his or her full principal and interest in the event of liquidation, if there are insufficient assets to provide for that. Senior notes can also be issued as convertible notes so that the bondholder can convert them to shares of stock.



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