Capital Deployment Risk · Debt, by priority (most senior first)
Mezzanine Debt and Subordinated Notes
Definition
Debt that ranks below senior loans but above equity, often unsecured or secured only by a pledge of the borrower's ownership interests, and priced higher because the lender is repaid only after senior lenders. In bankruptcy, the subordination agreement that sets this ranking is enforced to the same extent it is enforceable under nonbankruptcy law[1].
Federal law
A market and contract term. No Act of Congress defines it; the federal laws below apply as described.
- Bankruptcy Reform Act of 1978, Pub. L. 95-598, § 101 (enacting 11 U.S.C. § 510), 92 Stat. 2549. Enforces subordination agreements in bankruptcy to the same extent as under nonbankruptcy law (11 U.S.C. § 510(a)); it does not create or define mezzanine debt. Official text: govinfo.gov, U.S. Government Publishing Office.