International Law

JUNIOR VERSUS SENIOR DEBT IN THE DUTCH CARIBBEAN

By Karel.Frielink

High versus lower ranking debt

A corporate take-over can be financed with debt and/or equity. For example, the current management of a company (the target) could incorporate a corporate vehicle (Newco) to acquire the shares of the target, while Newco is financed by banks or other lending institutions.

Banks are typically senior debt holders, meaning that their debt is secured and/or has a higher priority than other debt, i.e. junior debt. Junior debt is a.k.a. subordinated debt.

Senior debt may be provided by one bank or a consortium of banks. In case of a syndication a bank ’sells’ a portion of its debt to other banks, i.e. a syndicate of lenders. It thus reduces its own exposure.

Karel Frielink
Attorney (Lawyer) / Partner

Full post as published by Karel's Legal Blog on March 10, 2008 (boomark / email).