Junior Debt
Categories: Credit, Bonds, Regulations, Company Management
In a bankruptcy, senior debt collects what they’re owed ahead of junior debt. So junior debt is just debt. Just like any other debt. It's just not top priority regarding collection when things go...awry.
Yep. Laws of the jungle. Remember the debt stack. Vendors to the company collect first. Then employees. Then the IRS--of course, because they always have their hands in your bidness. Then come senior bonds. Then junior. Then unsecured bonds, a.k.a. debentures. Then subordinated debentures...and there are all kinds of granules in all of the above bonds. (We’re very sorry if one day in your career you have to care about that ladder.) Ok...then there’s preferred stock. Then common.
Then...death. And, uh...taxes.
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Finance: What are Junior and Senior Debt...7 Views
Finance a la shmoop what are senior and junior debt? or like what's the
difference between them well what are they they're debt in a bankruptcy senior
debt collects what they're owed ahead of junior debt shockingly yep laws of the [Debt transferring to senior debt]
jungle remember the debt stack? vendors to the
company collect first then employees then the IRS of course because while
they always have their hands up in your bidness [Woman flips over stack of papers on womans desk]
then come senior bonds then come junior then come unsecured bonds also known as
debentures then subordinated debenture like debentures below debentures and
there are all kinds of granular things in the bonds above we're very sorry if
one day in your career you have to care about all of this okay then moving down [Man discussing debt stack]
the stack then there's preferred stock which collects after the most
subordinated debentures collect generally and then finally there's
common stock and well really finally then there's death and well in taxes [Uncle Sam appears at grave stone]