Module III· DCM — Investment Grade & Senior DebtIntermediate
Question

What is the difference between senior secured, senior unsecured, and subordinated debt?

Answer

Senior secured debt has priority claim and collateral. Senior unsecured debt has senior claim but no specific collateral. Subordinated debt ranks below senior debt and absorbs losses later in the capital structure, so it requires higher yield. Ranking affects pricing, recovery, covenants, ratings, and investor base.