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Senior debt is borrowed money that a company must repay first if it goes out of business. Each type of financing has a different priority level in being repaid if the company goes out of business.
What is senior debt example?
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 the difference between senior and junior debt?
Junior debt refers to bonds or other debts that have been issued with lower priority than senior debt. Unlike senior debt, junior debt is not typically backed by any type of collateral. As a result of these attributes, junior debt tends to be riskier and carry higher interest rates than senior debt.
What is included in senior funded debt?
Total Senior Funded Debt means total outstanding debt owed to the Bank by the Borrower plus all unsubordinated seller debt owed by the Borrower, all other indebtedness for borrowed money, capitalized leases, and any indebtedness secured by a lien on property owned by the Borrower.
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.
Can senior debt be unsecured?
Senior debt is usually unsecured and backed by the general assets of the company.
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.
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.
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 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.
What do you mean by funded debt?
Funded debt refers to any financial obligation that extends beyond a 12-month period, or beyond the current business year or operating cycle. It is the technical term applied to the portion of a company’s long-term debt that is made up of long-term, fixed-maturity types of borrowings.
How do you calculate funded debt?
Funded debts are calculated as long-term liabilities minus the shareholders’ equity.
Where is funded debt on the balance sheet?
A company lists its long-term debt on its balance sheet under liabilities, usually under a subheading for long-term liabilities.
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 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.
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 is a senior lender?
More Definitions of Senior Lender Senior Lender means the financial institutions, funds and banks who have advanced or agreed to advance term loan to the Concessionaire under any of the Financing Documents for meeting all or part of the Total Project Cost.
What are senior unsecured obligations?
Senior Unsecured Obligations means senior Indebtedness that is not secured by a Lien.
What is the difference between first lien and second lien?
Second-lien debt is borrowing that occurs after a first lien is already in place. It subsequently refers to the ranking of the debt in the event of a bankruptcy and liquidation as coming after first-lien debt is fully repaid. These debts have a lower priority of repayment than do other, senior, or higher-ranked debt.
Is sub debt a debt or equity?
Subordinated debt is any debt that falls under, or behind, senior debt. However, subordinated debt does have priority over preferred and common equity. Examples of subordinated debt include mezzanine debt, which is debt that also includes an investment.
What is super priority financing?
Super-priority for rescue financing that the debt be accorded priority over all preferential debts and all other unsecured debts; that the debt be secured by a security interest on property of the company that is unsecured or by a subordinate security interest on property of the company that is already secured; or.
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.
What is a senior credit facility?
A senior credit facility is secured (i.e. there is company collateral insuring the loan in the eyes of the lender). Legally speaking in the event of company collapse, a senior secured loan will be paid off through the sale of the collateral asset(s) before other more junior loans can claim assets.
What is secured debt vs unsecured debt?
While secured debt uses property as collateral to support the loan, unsecured debt has no collateral attached to it. However, because of collateral connected to secured debt, the interest rates tend to be lower, loan limits higher and repayment terms longer.
