Structural subordination
CFA Level I Glossary
Structural subordination means parent-company creditors rank behind subsidiary creditors with respect to the subsidiary’s cash flows and assets. The parent may only have an equity claim on the sub after the sub’s own debt is satisfied. Holding-company bonds can therefore be riskier than operating-subsidiary debt even with the same corporate family name. Confusing structural subordination with contractual subordination in one legal entity misses the corporate-structure angle.
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