With subordinated debt, there is a risk that a company cannot pay back its subordinated or junior debt if it uses what money it does have duringliquidationto pay senior debt holders. Therefore, it is often more advantageous for a lender to own a claim on a company's senior debt than...
Subordinated debt carries higher interest rates given its lower priority during payback. What is an example of seniority? For example, one employee may be senior to another either by role or rank (such as a CEO vice a manager), or by having more years served within the organization (such ...
Senior debt holders may be able to voice their opinions on how muchsubordinated debta company assumes. If the company becomesinsolvent, carrying too much debt may mean the business cannot pay all of its creditors. For this reason, senior debt holders typically want to keep other debt at a mi...
Senior Debt and Subordinated Debt are long-term sources of debt finance serving different purposes. It would be absolutely wrong to say, one debt is more important than the other. For the borrower and the lender, it serves different purposes and is equally important. Borrowers, according to the...
subordinated debt debt that may be repaid in bankruptcy only after senior debt is paid. Credit Crunch A decline in the ability or willingness of banks to lend. Credit Rationing Restriction of loans by lenders so that not all borrowers willing to pay the current interest rate are able to obt...
While the federal government finds it extremely easy to run large deficits, local governments cannot do anything like that. This surely helps explain the increasing role of the federal government. Certainly, this arrangement can be justified because of the federal role in countercyclical spending, ...
Risk shifting incentive remains with the banks when banks cannot internalise the full cost of their risk taking. This occurs when banks are charged insurance premiums other than the first best risk sensitive premiums. However, risk sensitive or market based premiums are difficult to be implemented ...
That said, when intercompany debt is subordinated, its effect may converge toward that of equity. An implication of the argument that related- party debt should not be respected would be that an entity in a group must borrow from third parties to obtain interest deductions. But lenders to a ...
debtthat, in the event of bankruptcy, must be repaid before subordinateddebtreceives any payment. Short-term financial plan A financial plan that covers the coming fiscal year. Short-term investment services Services that assist firms in making short-terminvestments. ...
advising China CITIC Bank International Limited on the issuance of US$500 million Tier 2 Subordinated Notes under its US$3 billion MTN Programme, one of the largest issuances of Basel III-compliant USD capital instruments by a Hong Kong bank in 2023. advising Zhuhai Huafa Group Co., Ltd. on...