A subordinated loan is a form of loan which is repaid only after the senior debt has been fully repaid first where a borrower defaults on their obligations of the loan. A subordinated loan is much more higher risk for investors than any senior loans and therefore dictates a higher rate of interest.
The subordinate lender has a second lien position and the senior lender retains their right to the first lien position.
The first position thus has the right to remain whole, as they are entitled to be repaid before the second-tier lender receives their repayment.
The majority of unsubordinated debt is usually secured by collateral.
Unsubordinated debt, also known as a senior security or senior debt, junior lien, mezz debt refers to a form of obligation that must be repaid first before any other form of debt.
Unsubordinated debt comes with a guarantee of repayment.
A subordinated loan is a form of loan which is repaid only after the senior debt has been fully repaid first where a borrower defaults on their obligations of the loan. A subordinated loan is much more higher risk for investors than any senior loans and therefore dictates a higher rate of interest.
