What is senior security?
Senior Security concerns those financial instruments issued by corporations that receive priority status for payment, in case of liquidation or dissolution of the company. The capital structure of most publicly held companies consists of a combination of debts and capital securities. Typical corporate configuration may include different bonds - or debt obligations of different maturity or due date - and preferred as well as common stocks. Priority status for most securities issued by companies can be evaluated according to their seniority in an ascending order as follows: debt securities, preferred shares and finally ordinary shares. The company bond is marked as the security of seniors, because the company is legally obliged to pay annual interest to the holders of these securities and, when bonds ripen or payable, the main amount of the bond must be repaid. In the case of bankruptcy liquidation, the preferred shareholders of the company pay off only after all are satisfiedHNY claims of bond holders.
Many corporations release different classes of higher securities that are included in the case of disposal according to the preferences provided. Some bonds issued by a company are supported or secured by the company's physical assets. Some bonds or bonds issued by a company may also be classified as subordinates or unquestioned. Although they can still be considered higher securities in connection with the claims of the company's preferred and joint shareholders, subordinate bonds are junior or subordinate to the holders of its unprocessed debt securities.
Generally, when purchasing a senior security issued by a company, investors will require a rate of reasonable risk. The specific annual interest rate that the company has to pay from the problem of bonds will depend on how afterDiscarded is a bond for other previously issued higher securities. Bonds with a lower priority situation must generally pay a higher interest rate for investors to compensate for additional risk. The contract on the contract or offset between the corporation and its higher non -disturbed bond holders often requires the company to maintain the status of seniority. Any subsequent issue of debt securities of companies would be the junior demands of these unprocessed bond holders.
Company preferred shares are often characterized as senior security. In the case of the liquidation of the Company, preferred shareholders have priority of payments before ordinary shareholders. In addition, the company must first pay dividends to preferred shareholders before they can pay any dividends for its ordinary shares.