SENIOR DEBT Meaning and
Definition
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Senior debt refers to a type of debt that has the highest priority for repayment in the event of a borrower's default or bankruptcy. It represents the primary obligation of a borrower and takes precedence over other forms of debt in terms of repayment. This means that if a company goes bankrupt, its senior debt holders have the first claim on the company's assets to recover their investment.
Senior debt is usually secured by collateral, such as physical assets or properties, which can be liquidated to repay the debt. It is typically offered at a lower interest rate compared to other types of debt, reflecting its higher priority and reduced risk.
In the capital structure of a company, senior debt ranks above subordinated debt, mezzanine debt, and equity. This means that senior debt holders are more likely to be repaid in full before other creditors or equity holders receive any proceeds. However, senior debt may still have varying degrees of risk depending on the financial condition and performance of the borrower.
Investors or lenders providing senior debt to a company are often large financial institutions, such as banks or insurance companies, due to their willingness to assume lower-risk investments. This form of debt is commonly used by corporations seeking to raise capital for expansion, acquisitions, or refinancing existing debt, as it provides a reliable and secure source of funds.
Common Misspellings for SENIOR DEBT
- aenior debt
- zenior debt
- xenior debt
- denior debt
- eenior debt
- wenior debt
- swnior debt
- ssnior debt
- sdnior debt
- srnior debt
- s4nior debt
- s3nior debt
- sebior debt
- semior debt
- sejior debt
- sehior debt
- senuor debt
- senjor debt
- senkor debt
- senoor debt
Etymology of SENIOR DEBT
The word "senior debt" finds its etymology in the Latin language. The term "senior" is derived from the Latin word "senior", which means "older" or "more advanced". It is used in the context of debt to convey that senior debt holders have a higher priority claim on an entity's assets and income in case of default or bankruptcy. Thus, "senior debt" refers to the debt that has a higher ranking or priority compared to other forms of debt.
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