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In finance, senior debt is debt that takes priority over other unsecured or otherwise more "junior" debt owed by an issuer. Senior debt is frequently issued in the form of senior notes or referred to as senior loans. Senior debt has greater seniority in the issuer's capital structure than subordinated debt. In the event the issuer goes bankrupt ...
Seniority can refer to either debt or preferred stock. Senior debt must be repaid before subordinated (or junior) debt is repaid. [1] Each security, either debt or equity, that a company issues has a specific seniority or ranking. Bonds that have the same seniority in a company's capital structure are described as being pari passu.
The bond will continue to earn the fixed rate for 10 more years. All interest is paid when the holder cashes the bond. For bonds issued before May 2005, the interest rate was an adjustable rate recomputed every six months at 90% of the average five-year Treasury yield for the preceding six months.
The subordinate bonds are allocated any losses from the collateral before losses are allocated to the senior bonds, thus giving senior bonds a credit enhancement. As a result, it is possible for defaults to occur in repayment of the underlying assets without affecting payments to holders of the senior bonds.
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Like other subordinated debt, it has claims after senior debt (hence "subordinated") in the event of default. [1] [2] Perpetual subordinated debt is not "straight debt", rather it is close to, or in some cases identical to, preferred shares, paying a fixed-rate coupon similar to preferred shares' fixed-rate dividend. Perpetual debt comes in two ...
In the simplest case, credit tranching means that any credit losses will be absorbed by the most junior class of bondholders until the principal value of their investment reaches zero. If this occurs, the next class of bonds (more senior) absorb credit losses, and so forth, until finally the senior bonds begin to experience losses.
Issued By: Agence France Trésor, the French Debt Agency OATs. BTFs - bills of up to 1 year maturities; BTANs - 1 to 6 year notes; Obligations assimilables du Trésor (OATs) - 7 to 50 year bonds; TEC10 OATs - floating rate bonds indexed on constant 10year maturity OAT yields; OATi - French inflation-indexed bonds; OAT€i - Eurozone inflation ...