Subordinated Debt

Loading the player...

What is 'Subordinated Debt'

Subordinated debt is a loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings.

Also known as a "junior security" or "subordinated loan."

BREAKING DOWN 'Subordinated Debt'

In the case of default, creditors with subordinated debt wouldn't get paid out until after the senior debtholders were paid in full. Therefore, subordinated debt is more risky than unsubordinated debt.

RELATED TERMS
  1. Subordinate Financing

    Debt financing that is ranked behind that held by secured lenders ...
  2. Perpetual Subordinated Loan

    A type of junior debt that continues indefinitely and has no ...
  3. Convertible Subordinate Note

    A short-term debt security that can be changed into common stock. ...
  4. Unsubordinated Debt

    A loan or security that ranks above other loans or securities ...
  5. Effective Net Worth

    The shareholders' equity of a corporation, plus subordinated ...
  6. Subordination Clause

    A clause in an agreement which states that the current claim ...
Related Articles
  1. Economics

    Understanding Subordinated Debt

    A loan or security that ranks below other loans or securities with regard to claims on assets or earnings.
  2. Economics

    What Does a Creditor Do?

    A creditor is a person or entity that loans money or provides goods or services to another entity with the expectation of being paid back in the future.
  3. Investing Basics

    Not All Debt Holders Are Equal

    Senior debt is borrowed money a company repays first if the company goes out of business.
  4. Bonds & Fixed Income

    Understand the Security Types of Corporate Bonds

    Any investor should be aware of the different security types regarding corporate bonds as well as the direct correlation to potential recovery rates.
  5. Economics

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  6. Professionals

    Debt (Long-Term, Short-Term, Secured and Unsecured)

    Debt (Long-Term, Short-Term, Secured and Unsecured)
  7. Professionals

    Introduction To Loans

    Learn about the many types of loans and how they function in business.
  8. Credit & Loans

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  9. Credit & Loans

    When Are Personal Loans a Good Idea?

    You never want to borrow money for frivolous reasons, but these five circumstances might warrant it.
  10. Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
RELATED FAQS
  1. What is the difference between subordinated debt and senior debt?

    Understand the difference between subordinated debt and senior debt. Learn what a company is required to do in case of bankruptcy. Read Answer >>
  2. How are mezzanine loans structured?

    Discover what a mezzanine loan is and how it is structured, along with reasons why companies consider this alternate form ... Read Answer >>
  3. What are some examples of debts that I can consolidate?

    Read about different kinds of debts than can be combined into a consolidation loan, including unsecured debts, secured debts ... Read Answer >>
  4. How do I determine whether a debt consolidation loan is a good debt relief option?

    Determine whether a debt consolidation loan can help you dig yourself out of debt. Learn about the different types of debt ... Read Answer >>
  5. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  6. Are debt-consolidation loans tax deductible?

    Learn about consolidating debt and whether the interest payments on your debt consolidation loan can be deducted from your ... Read Answer >>
Hot Definitions
  1. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  2. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  3. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center