Junior Debenture Law and Legal Definition

Junior debenture is a debenture that will not be repaid until senior debentures are repaid, when the borrower gets into financial difficulty. It is issued by a manufacturing or industrial corporation and backed by the full faith and credit of the issuer. A junior debenture is a general obligation bond and creates no lien on the corporation's property. In liquidation, a junior debenture has priority on all assets not specifically pledged under mortgage bonds once the claims of senior debt are satisfied.