Senior Debt Law and Legal Definition

A debt having priority over other unsecured debts owed by an issuer is a senior debt. A senior debt has priority for repayment in liquidation. When an issuer goes bankrupt, senior debt must be repaid before other creditors receive any payment. This arrangement arises from a specific subordination agreement or a public issuance of subordinated debt instruments. Senior debt is often secured by collateral. It is the collateral on which the lender puts first lien. All assets of a corporation is covered in senior debt. Moreover, senior debt is used for revolving credit lines.