Debt that has contractually superior rights compared to other debt of a company. The superior rights can be with respect to priority of payment of principal or interest, or both, as well as with respect to collateral in which the holders of both senior debt and junior debt have a security interest.
A senior debt issue ranks before other issues in terms of claims on assets in the event of a company break-up. For example, senior bonds rank before junior bonds, which rank before senior debentures, which rank before junior debentures, etc.
Long-term banking finance in an LBO, generally granted from 5 to 8 years. Senior debt implies that the “lender” has priority over the other lenders involved in the structure. Interest and annual repayments have priority over mezzanine debt. Distinction is usually made between redeemable senior debt and bullet senior debt, of which principal repayment takes place at expiration whereas interests are paid annually.
A phrase used to describe secured medium or long term bank debt provided to a company, often as part of a finance package also including mezzanine finance and development capital. Its seniority means it ranks ahead of other finance in terms of security.