MENU
EDU Articles

Learn about investing, trading, retirement, banking, personal finance and more.

Ad is loading...
Help CenterFree ProductsPremium Products
IntroductionMarket AbbreviationsStock Market StatisticsThinking about Your Financial FutureSearch for AdvisorsFinancial CalculatorsFinancial MediaFederal Agencies and Programs
Investment PortfoliosModern Portfolio TheoriesInvestment StrategyPractical Portfolio Management InfoDiversificationRatingsActivities AbroadTrading Markets
Investment Terminology and InstrumentsBasicsInvestment TerminologyTradingBondsMutual FundsExchange Traded Funds (ETF)StocksAnnuities
Technical Analysis and TradingAnalysis BasicsTechnical IndicatorsTrading ModelsPatternsTrading OptionsTrading ForexTrading CommoditiesSpeculative Investments
Cryptocurrencies and BlockchainBlockchainBitcoinEthereumLitecoinRippleTaxes and Regulation
RetirementSocial Security BenefitsLong-Term Care InsuranceGeneral Retirement InfoHealth InsuranceMedicare and MedicaidLife InsuranceWills and Trusts
Retirement Accounts401(k) and 403(b) PlansIndividual Retirement Accounts (IRA)SEP and SIMPLE IRAsKeogh PlansMoney Purchase/Profit Sharing PlansSelf-Employed 401(k)s and 457sPension Plan RulesCash-Balance PlansThrift Savings Plans and 529 Plans and ESA
Personal FinancePersonal BankingPersonal DebtHome RelatedTax FormsSmall BusinessIncomeInvestmentsIRS Rules and PublicationsPersonal LifeMortgage
Corporate BasicsBasicsCorporate StructureCorporate FundamentalsCorporate DebtRisksEconomicsCorporate AccountingDividendsEarnings

What is Subordinated Debt?

Subordinated Debt is a junior security which will be serviced after the Unsubordinated Debt in the event of a company bankruptcy.

Subordinated Debt has been deemed less important than the Unsubordinated Debt that a company has taken on, in terms of what priority it will have for payment in the event of company default. The amount of money and length of term on the loan are considerations when making this distinction.

What priority a bond has in the event of insolvency can be an important consideration for an investor pursuing high yield bonds. Generally the highest yielding bonds are at the highest risk of default, and sometimes they live up to their unfortunate moniker of “junk bonds.”

When collateralized debt obligations are divided into tranches, the unsubordinated debt will be in the A tranche, while the B and C tranches will contain the subordinated debt.

Ad is loading...