What is the difference between junior and senior 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 does junior capital mean?
Junior capital defines any non-senior type of debt capital. These would include mezzanine debt or equity. Junior status indicates it is at the risk capital level and that it is generally not secured by assets. This means that the provider is at a risk capital layer in the capital structure.
What is a junior creditor?
More Definitions of Junior Creditors Junior Creditors means all holders of securities and other creditors (if any) of the Issuer whose claims rank, or are expressed to rank, junior to the claims of the Holders (including, without limitation, holders of Junior Securities).
Who provides junior debt?
Generally, Junior debt holders are the parent company of the company, shareholders of the company or the general public, etc. Mostly large banks provide Senior debt with a collateral security to large organizations. Generally, small banks with no collateral security provide Junior debt to smaller organizations.
Can junior debt be secured?
Junior debt is normally unsecured and can be provided without any collateral, making it risky. Also, it tends to come at higher interest rates. It can be secured to fund recapitalization, acquisitions, growth capital, etc.
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 are junior lenders?
Junior Lender means the maker of any Junior Loan or beneficiary of any Junior Loan Deed of Trust.
What is a junior investor?
The Junior Investor qualifies as an “accredited investor” within the meaning of Rule 501(a) of Regulation D under the Securities Act, and has such knowledge and experience in financial and business matters that such Junior Investor is capable of evaluating the merits and risks of its purchase of the Junior Preferred …
What are junior subordinated debentures?
Subordinated debentures are unsecured bonds that are indentured with a “subordination agreement” that renders them subordinate to all present and future debt in the event of default, liquidation, reorganization or bankruptcy.
What is super senior debt?
Super-senior debt. Senior lenders are those who are in the best position if a company gets into difficulties with its debt as the senior lenders have first call on the unsecured assets (before other lenders).
Do you pay interest on a revolver?
Revolver financing doesn’t involve fixed payments or coupon payments. Instead, a minimum monthly payment is due based on the balance and interest rate according to the terms of the credit agreement.
How much is LBO debt?
In a leveraged buyout (LBO), there is usually a ratio of 90% debt to 10% equity. Because of this high debt/equity ratio, the bonds issued in the buyout are usually not investment grade and are referred to as junk bonds.
