LearnBonds.com

Subordinated Debt – What it is and How it Works

Rate this post

Subordinated debtSubordinated debt is another name for any debt which is behind senior debt in line to be paid in the event of bankruptcy.  Should a company liquidate or fall into bankruptcy and be forced to liquidate, holders of subordinated bonds will be paid after all claims by senior debtholders are satisfied.  While subordinated debtholders are behind senior debt holders, they are ahead of stockholders in the corporation.

For the above reasons subordinated debt is expected to provide a higher return than senior debt, and a lower return than the company’s equity holders.  Depending on the situation subordinated debt can also be referred to as mezzanine debt, junior debt, or sub-debt.

For the definition and explanation of more bond related words visit the Learn Bonds glossary where we give the meaning of many additional terms.

Learn More

Do it yourself credit analysis. How to go beyond the letter rating.
Convertible Bonds vs. Preferred Stocks
What Happens When a Corporate Bond Defaults?
How to trade corporate bonds with E*Trade

All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
David Waring

David Waring

David Waring was the founder of LearnBonds.com and has been a major contributor to the extensive library of investing news and information available on the site. Until the launch of Learnbonds.com in late 2011 there was no single site on the internet catering exclusively to the individual bond investor. This was true even though more individuals own stocks than bonds. Learn Bonds was launched to fill that gap.

Write first comment

Reply

Your email address is not published.

HTML Snippets Powered By : XYZScripts.com