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Junior Debt

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Junior debt is a debt (such as a bond) that is lower in repayment priority than other debts in the event of the issuer's default. Junior debt is usually unsecured, meaning that there is no collateral behind it. In the event that the issuing company goes out of business, the junior debt will likely not be paid back, either with money or with assets, since all higher-ranking bonds will be given priority. Junior debt is also called subordinated debt, due to its position in the debt hierarchy. One common junior debt is the second mortgage, which ranks behind the first mortgage and has a lesser claim in the event of default. Junior debt naturally carries more risk than higher-priority debts.



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