seniorsecured

Senior secured debt refers to a type of loan or bond that holds the highest priority in terms of repayment in the event of a company's bankruptcy or liquidation. This means that holders of senior secured debt are paid back before any other creditors, including unsecured creditors, subordinated debt holders, and equity holders.

The "secured" aspect of this debt signifies that it is backed by specific collateral, which is an asset or group of assets owned by the borrower. This collateral provides a tangible source of repayment for the lenders if the borrower defaults on their obligations. Common types of collateral include real estate, equipment, inventory, or accounts receivable. The value of the collateral is typically assessed and often exceeds the loan amount to provide a buffer for the lenders.

Because of the preferential repayment status and the collateral backing, senior secured debt generally carries a lower risk for investors compared to other forms of financing. Consequently, it typically offers a lower interest rate or yield than unsecured debt. Companies often use senior secured debt to finance significant projects, acquisitions, or to refinance existing debt, as it can provide access to capital at a more favorable cost. The terms of senior secured debt, including interest rates, repayment schedules, and covenants, are detailed in a loan agreement or indenture.