# Senior vs Subordinated Debt

*Corporate Finance & M&A — Finicade finance glossary*

Seniority determines who gets paid first in a default, and the ranking drives almost everything about pricing. Senior secured debt claims specific collateral and recovers most; subordinated debt waits and typically recovers a fraction. Because the same company's obligations can span a 10% yield gap purely on ranking, capital structure arbitrage exists as a strategy in its own right.

**Also known as:** seniority, subordination, debt waterfall

**Related terms:** [Mezzanine Financing](https://finicade.com/glossary/mezzanine-financing), [Recovery Rate](https://finicade.com/glossary/recovery-rate), [Tranche](https://finicade.com/glossary/tranche), [Covenant](https://finicade.com/glossary/covenant), [Bankruptcy](https://finicade.com/glossary/bankruptcy)

Source: https://finicade.com/glossary/senior-vs-subordinated-debt