Seniority (financial)

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In finance, seniority refers to the order of repayment in the event of a sale or bankruptcy of the issuer. Seniority can refer to either debt or preferred stock. Senior debt must be repaid before subordinated (or junior) debt is repaid.[1] Each security, either debt or equity, that a company issues has a specific seniority or ranking. Bonds that have the same seniority in a company's capital structure are described as being pari passu. Preferred stock is senior to common stock in a sale when preferred shareholders must receive back their preference, typically their original investment amount, before the common shareholders receive anything.

FpML[edit]

The seniority of bonds recognised in FpML (Financial products Markup Language) are as follows:

FpML value Description
Senior Top precedence
SubTier3 Subordinate, Tier 3
SubUpperTier2 Subordinate, Upper Tier 2
SubLowerTier2 Subordinate, Lower Tier 2
SubTier1 Subordinate, Tier 1

See also[edit]

References[edit]

  1. ^ The American Heritage Dictionary of Businessurt Publishing Company, 2010