Senior debt refers to debt secured by collateral on which the lender has put in place a first lien. Usually this covers all the assets of a corporation and is often used for revolving credit lines. It is the debt that has priority for repayment in a liquidation.
It is a class of corporate debt that has priority with respect to interest and principal over other classes of debt and over all classes of equity by the same issuer.
Definition A hybrid security, as the name implies, is a security that combines two or more different financial instruments. ... A convertible bond is type of bond that can be converted into shares of stock in the issuing company, usually at some pre-announced ratio. ... A preferred stock, also known as a preferred share or simply a preferred, is a share of stock carrying additional rights above and beyond those conferred by common stock. ... // Basics A Mezzanine Loan is a relatively large loan, typically unsecured (ie. ... Private equity is a broad term that refers to any type of equity investment in an asset in which the equity is not freely tradable on a public stock market. ... This article needs to be wikified. ... Mezzanine capital (or mezzanine debt) is a broad financial term that refers to unsecured, high-yield, subordinated debt or preferred stock that represents a claim on a companys assets that is only senior to that of a companys shareholders. ...
A debt subordination agreement is a contract in which a junior creditor agrees that its claims against a debtor will not be paid until all senior indebtedness of the debtor is repaid.
Under a conditional debt forgiveness agreement, a creditor may voluntarily undertake not to enforce its right of payment against the debtor as long as debts owing to other creditors are due and outstanding.
If the agreement for the sale of seniority effects specific subordination of HC's claim to that of Senior, as opposed to general subordination to all of OC's creditors, Junior, while subordinated to Senior, would be in a better position than that depicted in Figure 3, where HC advanced equity to OC.
Another factor that affects the quote on a CDS contract is the debtseniority of the reference obligation.
In the event of a company becoming bankrupt bonds that are issued as seniordebt are more likely to be paid back than bonds issued as subordinated, or junior debt, hence junior debt trades at a greater credit spread than seniordebt.
If Risky Corporation defaults on its debt 3 years into the CDS contract then the premium payments would stop and Derivative Bank would ensure that the pension fund is refunded for its loss of 10 million euros.
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