Subordinated, often unsecured debt sitting between senior secured loans and equity in the capital structure. Typical structure: 0–1.5× EBITDA, 11%–15% all-in coupon split cash/PIK (e.g., 8% cash + 5% PIK), bullet maturity (5–8 years), call protection (102/101/par), and an equity kicker (warrants for 1%–5% of fully diluted equity or co-investment rights) that lifts the all-in IRR roughly 200–400 bps above the headline coupon. Highest-yielding layer of corporate debt; highest loss-given-default (sim 80% LGD).