Jurisdiction(s):
United Kingdom

Key definition

Junior debt definition

What does Junior debt mean? In practice, junior debt is borrowing that, by agreement (contractual subordination) or by structure (structural subordination), ranks behind senior debt for payment, enforcement and recoveries. It is a market term rather than a statutory definition; priority is set by the security package and by subordination provisions in intercreditor or subordination agreements. Typical features include payment blockages, turnover of recoveries, enforcement standstills, limits on junior recoveries, and second‑ranking (second‑lien) or unsecured status. Common forms are subordinated notes, mezzanine finance, vendor loans and shareholder loans, often with higher pricing or payment‑in‑kind interest to reflect increased risk. On insolvency or restructuring (administration, liquidation,...

Debt Layering and Priority in Leveraged Finance for Restructuring Lawyers: Super Senior, Senior, Unitranche, Second Lien, Mezzanine and Junior Debt—Intercreditor Controls, Standstills and Waterfalls

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

Borrowers can choose from a broad range of Debt and capital structuring routes. Traditionally, senior debt (typically provided by banks) sat at the top, then mezzanine finance, followed by Junior debt, each ranking ahead of unsecured creditors and shareholders/equity holders. After the 2007/8 credit crunch, businesses increasingly tapped capital markets and non-bank sources (eg private credit) to widen their funding, adding further layers of indebtedness. This Practice Note offers a straightforward overview of the different tiers of debt and security a restructuring lawyer may encounter. It outlines the financing layers and the forms of security commonly seen in practice by a restructuring lawyer. It also sketches how those tiers now sit together in practice.

Capital structures and interplay between creditors

Typically, external borrowings sit at the operating company (Opco) level. The Opcos own the core business assets (eg premises, key manufacturing equipment and valuable intellectual property), produce most of the profits, and lenders seek security over those assets. In some arrangements, high-value items such as intellectual property or leases are ring-fenced from the principal trading entity; such asset-holding companies can be included as obligors or guarantors and may likewise grant security...

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Web page updated on 21/05/2026

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