What is structurally subordinated?

Structurally subordinated refers to a situation where a particular class of debt or security is placed at a lower priority in the repayment hierarchy of a corporate structure. This implies that if the company goes bankrupt or defaults on its debt, the structurally subordinate debt holders will only receive payment after all the senior creditors and bondholders have been satisfied.

For example, in a typical corporate structure, secured creditors such as banks or bondholders would have a priority claim on the company's assets if it were to default. Unsecured bondholders would rank after secured creditors, while shareholders would be last in the repayment hierarchy.

Structurally subordinate bonds or securities are typically issued by companies with a higher credit risk and lower credit rating. These securities may offer a higher interest rate compared to higher-rated securities to compensate investors for the additional risk they are taking on.

Overall, structurally subordinate debt or securities carry a higher degree of risk and should only be considered by investors who are willing to accept that risk in exchange for potentially higher returns.