junior security definition

junior security

Bond, debenture, stock (share) which, by its general nature, takes a lower (subordinate) priority to another (senior) security's claims on the assets and earnings of the issuer for the payment of dividend, interest, and principal. Holders of senior securities are paid before the holders of the junior securities. For example, common stock (ordinary shares) is junior to preferred stock (preference shares), which are junior to debentures (unsecured bonds), which are junior to mortgage (secured) bonds. Hence, in case of the liquidation of the issuing firm, mortgage bonds will be paid first and ordinary stock the last. Also called subordinated debenture or subordinated security.

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