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Although the second lien loan's security interest is subordinated to the first lien loan's interest in the pledged assets of the company, the ranking of first lien and second lien loans are the same in the event the pledged assets are not sufficient to satisfy the outstanding borrowings.
Subordination is the process by which a creditor is placed in a lower priority for the collection of its debt from its debtor's assets than the priority the creditor previously had, [1] In common parlance, the debt is said to be subordinated but in reality, it is the right of the creditor to collect the debt that has been reduced in priority.
Such debt is referred to as 'subordinate', because the debt providers (the lenders) have subordinate status in relationship to the normal debt. Subordinated debt has a lower priority than other bonds of the issuer in case of liquidation during bankruptcy, and ranks below: the liquidator, government tax authorities and senior debt holders in the ...
The priority of liens on a property, sometimes called lien positioning, identifies which debt will be repaid first in the event of default and foreclosure. When the collateral, such as a home, is ...
Senior debt has greater seniority in the issuer's capital structure than subordinated debt. In the event the issuer goes bankrupt, senior debt theoretically must be repaid before other creditors receive any payment. [1] Senior debt is often secured by collateral on which the lender has put in place a first lien.
A subordination agreement is a legal document used to make the claim of one party junior to (or inferior to) a claim in favor of another. It is generally used to grant first lien status to a lienholder who would otherwise be secondary to another party, with the approval of the party that would otherwise have first lien.
Clear title means that the title to a property doesn’t have any liens or other issues attached to it. It’s about ownership, and who does — or does not — have a claim to legal ownership on ...
Tranches with a first lien on the assets of the asset pool are referred to as senior tranches and are generally safer investments. Typical investors of these types of securities tend to be conduits, insurance companies, pension funds and other risk averse investors. Tranches with either a second lien or no lien are often referred to as "junior ...