What Is Senior Debt?
Senior debt is the highest priority debt a company must repay in bankruptcy, ensuring its lower risk. It’s borrowed money that must be repaid first if a company goes out of business.
Each type of financing has a different priority level in being repaid. If a company goes bankrupt, the issuers of senior debt, which are often bondholders or banks that have issued revolving credit lines, are most likely to be repaid. They’re followed by junior or subordinated debt holders and hybrid debt instruments such as convertible notes, then by preferred stock holders. Common stock holders are last on the list.
Senior debt typically is typically secured by collateral, which it less risky compared to other debts….