Subordinated Debt (Junior Debt)

Category: finance

Debt that ranks below senior loans in terms of claim priority on assets or earnings if a default occurs.

Junior debt carries higher risk profiles, commanding increased interest yields to compensate the investor. If a company dissolves, subordinated debt holders cannot receive any cash until all senior secured credit claims are completely made whole.

Common Examples

• The institutional fund purchased the company’s subordinated debt note, seeking higher yields while acknowledging the lower priority status.
• Our primary credit provider requires all founder-backed notes to be explicitly classified as subordinated debt structures within the ledger.