What Is Senior Debt

What is included in senior debt?

Any debt with higher priority over other forms of debt is considered senior debt. For example, a company has debt A that totals $1 million and debt B that totals $500,000. Debt A is senior debt, and debt B is subordinated debt. If the company files for bankruptcy, it must liquidate all of its assets to repay the debt.

What is senior debt on a balance sheet?

Senior Debt, or a Senior Note, is money owed by a company that has first claims on the company’s cash flows. It is more secure than any other debt, such as subordinated debt (also known as junior debt), because senior debt is usually collateralized by assets.

What is senior debt in real estate?

Senior debt is borrowed money with precedence over any other debts owed by an issuer. It takes priority for repayment if the company goes out of business or needs to sell the property. If the issuer becomes insolvent, it has to pay back this debt before other creditors receive any payment.

What is senior bank debt?

A senior bank loan is a debt financing obligation issued to a company by a bank or similar financial institution and then repackaged and sold to investors. The repackaged debt obligation consists of multiple loans. Senior bank loans are usually secured via a lien against the assets of the borrower.

How is senior debt calculated?

There are several measures to typically estimate a company’s maximum subordinated debt: Total debt to EBITDA ratio of 5-6 times. As mentioned above, senior debt typically accounts for 2-3 times debt to EBITDA, hence the remaining for subordinated debt. EBITDA to cash interest of about 2 times.

Can senior debt be unsecured?

Senior debt is usually unsecured and backed by the general assets of the company.

Is debt senior to equity?

Senior debt has greater seniority in the issuer’s capital structure than subordinated debt. It is a class of corporate debt that has priority with respect to interest and principal over other classes of debt and over all classes of equity by the same issuer.

Why do companies issue senior notes?

Why Do Companies Offer Convertible Senior Notes? Convertible notes and convertible senior notes are a popular way for companies to borrow money with lower interest obligations than other kinds of debt. When note-holders redeem their notes for company shares, they reduce the company’s debt obligations.

What is the difference between senior and mezzanine debt?

Mezzanine debt is a hybrid form of capital that is part loan and part investment. Senior debt is a loan from a bank. Banks lend off of asset values so most senior loans are collateralized with assets. The bank loan is always secured and in the first position.

Is revolving credit facility senior debt?

Revolving credit facility (revolver), which can be paid down and reborrowed as needed. – Term debt (senior and subordinated) with floating rates. Payments-in-kind (PIK) toggle allows no interest payment and increase in principal.

What are the types of debt?

Types of Debt. There are four main categories of debt. Most debt can be classified as either secured debt, unsecured debt, revolving debt, or a mortgage.

What are senior bonds and securities?

A senior bond is a type of debt security that has a superior claim on the assets and income of the entity that issues the bond. Bonds that have secondary claim on the issuer’s assets are classed as junior bonds. Those with the strongest claim on those same assets are referred to as being senior bond issues.

Are senior loans risky?

Not Risk-Free In a nutshell, Senior loans are riskier than investment-grade corporate bonds but slightly less risky than high-yield bonds. It’s important to keep in mind that valuations in this market segment can change quickly.

Are senior notes debt?

A senior note is a type of corporate bond that carries a higher-priority claim in bankruptcy than a junior note, which means those who own senior notes get repaid first. Senior notes are typically unsecured debt; they aren’t secured by collateral.

What are US senior loans?

A refresher on US senior loans Simply put, senior loans are floating-rate notes issued by companies with high financial leverage. They are also referred to as leveraged or syndicated loans. Loan coupons adjust periodically based on changes in short-term interest rates.

Is revolver a subordinated debt?

A revolver is a form of senior bank debt that acts like a credit card for companies and is generally used to help fund a company’s working capital needs. The interest rate charged on the revolver balance is usually LIBOR plus a premium that depends on the credit characteristics of the borrowing company.

Are bonds subordinated debt?

What Is Subordinated Debt? Subordinated debt (also known as a subordinated debenture) is an unsecured loan or bond that ranks below other, more senior loans or securities with respect to claims on assets or earnings. Subordinated debentures are thus also known as junior securities.

What is distressed credit?

Distressed credit restructuring / turnaround. Distressed credit funds also buy suffering target companies utilizing equity, sometimes purchasing them before an expected bankruptcy and other times during the bankruptcy process. The goal is to gain control of companies that are under par value and then restructure them.

What is senior leverage?

“Senior Leverage Ratio” shall mean the ratio of Senior Debt of the Parent and its Subsidiaries on a consolidated basis to EBITDA for the twelve (12) month period most recently ended.

What is senior capital?

Senior Capital means any and all Equity Securities, indebtedness or debt securities of the Company or any of its Subsidiaries (other than such issuances between or among the Company and its direct or indirect wholly-owned Subsidiaries), other than Common Shares (or Equity Securities convertible into or exercisable or.