Senior Security

AAA

DEFINITION of 'Senior Security'

A security that ranks above another security in the event of the company's bankruptcy or liquidation. A senior security is called such because it is considered "senior" to another in the company's hierarchy of capital providers. Should the company go bankrupt or face another liquidating event, holders of the senior-most security will be in line to receive repayment of their invested monies first, before other creditors receive any payment. Next in line would be holders of the second-most senior security.




INVESTOPEDIA EXPLAINS 'Senior Security'

Debt is always considered senior to equity. In terms of debt, secured debt is considered senior to unsecured debt, such as debentures, while preferred securities are considered senior to common shares.

Because of its greater degree of safety, a senior security will generally offer lower returns than securities below it in the hierarchy. Common stock, which is typically the least senior security in a company, generally offers investors the highest potential returns to compensate for this additional degree of risk.

RELATED TERMS
  1. Junior Security

    A security that ranks lower than other securities in regards ...
  2. Liquidation

    1. When a business or firm is terminated or bankrupt, its assets ...
  3. Unsubordinated Debt

    A loan or security that ranks above other loans or securities ...
  4. Pari-passu

    A Latin phrase meaning "equal footing" that describes situations ...
  5. Subordinated Debt

    A loan (or security) that ranks below other loans (or securities) ...
  6. Senior Debt

    Borrowed money that a company must repay first if it goes out ...
Related Articles
  1. The Dirt On Delisted Stocks
    Investing Basics

    The Dirt On Delisted Stocks

  2. Bankruptcy Protection For Your Accounts
    Retirement

    Bankruptcy Protection For Your Accounts

  3. How To Profit From Debt Securities In ...
    Mutual Funds & ETFs

    How To Profit From Debt Securities In ...

  4. An Overview Of Corporate Bankruptcy
    Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center