Senior Debt

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What It Means

Senior Debt refers to loans that hold a higher priority, also known as Liquidation Preference, in the event of a bankruptcy.

Why It’s Important

The higher Liquidation Preference of Senior Debt means it will be more likely to get paid back in a downside scenario, such as a bankruptcy. This preference implies a lower risk for this type of loan compared to subordinated notes. As a result, Senior Debt often carries lower interest rates than Subordinated Debt.

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