Senior and Subordinated Debt

What is Senior and Subordinated Debt?

Subordinated debt is any kind of debt that has a lower claim on earnings and assets than other debt. For example, the mezzanine tranche of a CDO is subordinated debt as it will only be repaid once all other tranches have been paid.

In the event of a default, the owners of the subordinated debt will not receive any payments until all the lenders above them have been paid in full.

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