Senior Secured
Corporate Credit Analysis glossary · Distressed Debt & Restructuring
Definition
Debt that ranks senior in the capital structure and is secured by specific collateral. Highest recovery class in default, typically commanding the lowest spread among non-investment-grade tranches.
Senior Secured in plain English
When a company borrows money, not all lenders are treated equally if things go wrong. 'Senior' means you're first in line to get paid back, and 'secured' means specific property (like a building or equipment) is pledged to you as a backstop. So senior secured lenders have the best odds of getting their money back in a bankruptcy — which is exactly why they accept a lower interest rate (spread) than riskier lenders. It's like lending a friend $100 but holding onto their bike until they repay: you're safest, so you don't need to charge much extra for the risk.
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