Senior debt is a type of loan secured by collateral that must be repaid first in the event of a company default.
For example, a business carries $400,000 in senior debt — a first-lien term loan secured by its equipment and real property. In a wind-down scenario, the senior lender is paid first from the sale of those assets before any mezzanine lenders or shareholders receive proceeds.
Why it matters: It is the cheapest capital available and gets paid first in bankruptcy, making it the foundation of most corporate capital structures.
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