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Prior lien bonds are the mark of a corporation in turmoil. These bonds guarantee collateral that has already been guaranteed on prior issues, except with priority over the previous bonds. This effectively creates a closed-end indenture, in reverse chronological order. In a nod to justice, thankfully, a corporation must have the consent of first-mortgage bondholders before they may issue prior lien bonds. This is unlikely, to put it mildly, but sometimes a corporation will find that it's worth a try.
Companies that issue prior lien bonds are either rising out of major reorganization or struggling to avoid serious financial disaster. It's a desperate measure, but the significantly higher coupon of prior liens can make these bonds very attractive when issued by corporations with fundamentally good business practices that have fallen on hard times.
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