For corporate borrowers, senior debt is repaid first and has priority over unsecured debt if a company declares insolvency. The senior debt will be repaid from any leftover cash or the sale of certain assets or securities. In general, debt is divided into two segments, either senior or subordinate.
Although debt is divided into different segments, senior debt can also be defined as either secured or unsecured debt.
For the most part, it’s important to remember that senior debt has a higher priority than other forms of debt. If a company defaults on its repayments of loans or has to declare insolvency, the senior form of debt is to be repaid first before any other outstanding forms of debt.
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