Senior debt

Senior debt is a security that has a high priority for repayment in the event of the liquidation of the issuer. This type of debt is considerably more secure for investors than junior debt, since the remaining funds of the business must be applied to repayment of the senior debt before other obligations of the issuer are dealt with. Senior debt also has repayment priority over all classes of equity. Because of the relative repayment security of senior debt, investors are usually willing to accept a lower interest rate on it. Examples of senior debt are lines of credit and bond offerings.