Scroll Top


    Subordinated debt

    ## Introduction to Subordinated Debt

    Subordinated debt is a lax loan or bond that positions below more senior loans or securities with claims on assets or earnings. Subordinated debentures are also known as junior securities. In the case of default, creditors owning a subordinated debt will not be paid until the senior bondholders are paid in full.

    Understanding Subordinated Debt

    Subordinated debt is riskier than unsubordinated debt. It can be any loan that's paid after other corporate debts and loans are repaid. Borrowers are normally larger corporations or other business entities.

    Types Of Subordinated Debt

    1] Bank Loan Or Bond A bond acknowledged by a bank could be a junior debt. This is a clever option for many banks because interest payments are tax-deductible. A study in the year 1999 found that banks issue such a debt to grow their risk level. But, they only give such a loan to big corporations and only after assessing their cash flows and creditability.

    2] Mezzanine Debt This debt ranks higher than the common shares of stock at the time of the payment. It is known as a hybrid debt.

    3] Asset-backed Security A lender issues this kind of a debt in tranches or in portions. The senior tranches rank high in the terms of payment. A good example of an asset-backed security is mortgage-backed security.

    4] Common Stock Preference shares are known to rank higher than the common stock, while debentures rank higher to preference shares.

    Popular Topics

    Latest Articles

    Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

    Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

    CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

    Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

    Cleartax is a product by Defmacro Software Pvt. Ltd.

    Company PolicyTerms of use


    ISO 27001

    Data Center


    SSL Certified Site

    128-bit encryption