Nachrangige

Nachrangige (subordinated) is a German term used in finance and law to describe claims, securities, or capital instruments that rank behind senior or secured claims in the payment order during insolvency or liquidation. Subordinated claims are repaid only after higher-priority claims have been satisfied, which makes them riskier but typically associated with higher interest or yields.

In insolvency law, creditor claims are paid according to a fixed hierarchy. Secured creditors with collateral are paid first, followed by unsecured senior creditors. Subordinated creditors are paid after these groups, and shareholders are last. Subordinated instruments can include Nachrangdarlehen (subordinated loans), bonds with a subordinated status, or hybrid capital. They are often unsecured and may carry features such as higher coupons, step-up provisions, or conversion rights into equity.

In the banking sector, subordinated debt is commonly used to reinforce regulatory capital, classified as Tier 2 capital under international standards (Basel II/III). Such instruments help banks meet capital adequacy requirements but bear higher risk for investors, who face a greater likelihood of loss in insolvency scenarios. Some subordinated instruments may be written down or converted to equity in resolution processes (bail-in), depending on jurisdiction and contractual terms.

Usage varies by jurisdiction, and the exact ranking can differ in national insolvency acts. Generally, nachrangig signals that a claim is subordinate to others and thus bears greater credit risk, in exchange for higher potential return.