v line

Exercise Extreme Caution when using many of our free forms - or any legal material. While they may provide general ideas on format & content, validity requirements can and do vary greatly from state to state. Many MUST be Properly Modified for your own location and circumstances. (Hint: If in doubt it's usually safer to include unneeded clauses than to leave out necessary ones. . . . but it's even safer to consult a competent source or use current, state specific ones like ours mentioned below.) Also, we urge people (and lawyers too) to read our Relying On Legal Info FAQ.


See Our Premium Forms!


PREMIUM LEGAL RESOURCES LEGAL FORMS ASK A LAWYER

Subordinated Debentures (Junior Debt)

Subordinated debentures are unsecured bonds that are indentured with a "subordination agreement" that renders them subordinate to all present and future debt in the event of default, liquidation, reorganization or bankruptcy. Present and future debt, such as straight debentures and money loaned by banks and insurance companies, thereby becomes "senior debt," while subordinated debentures are "junior debt."

The biggest advantage for corporations issuing subordinated debentures is that the subordination agreement makes junior debt unratable along with debentures and other unsecured debt of general status, which puts them in the company's equity base on the balance sheets. This effectively limits the company's book-value debt, which makes it easier to obtain further loans from banks and financial institutions, who can be sure at least that they will not have to wait in line with junior debtors in the event of default or liquidation.

Subordinated debentures are much riskier investments than straight debentures, and holders of these instruments are rewarded with very high interest rates. In addition, many subordinated debentures are issued with conversion features, making them even more attractive to investors.

See also:


Google+

‹‹ Back To The 'Lectric Law Library®

‹‹ Back To Investments & Securities Law

PREMIUM ROOMS

Scales

Scales

SOME MAIN ROOMS

Scales

Scales

LEGAL TOPIC AREAS

Scales

Scales

MISC BUSHWAH

Scales

Scales


Most Popular Free Legal Forms:
Quit Claim Deed
Lease Agreement

Scales

Scales

Most Popular Articles:
Crimes Mala In Se
Crimes Mala Prohibita

Scales

The Current Page is:
Subordinated Debentures (Junior Debt)