Subordinated Debt

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DEFINITION of 'Subordinated Debt'

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.

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