In order to understand how senior debt can help any property dealer in the fulfillment of his contractual obligations towards his financers as well as buyers, it is imperative that we understand exactly what senior debt is all about.
o What precisely is senior debt anyway?
In modern day finance, senior debt, is usually issued in the form of different types of senior notes that are often referred to as assorted ‘senior loans. As a matter of fact, this is a form of debt that evidently takes a clear priority over various highly unsecured, or what are more commonly referred to as “junior” loans that are usually owed by the issuer himself.
It can also be quite unequivocally stated that senior debt has a vastly greater seniority as far as the issuing agency’s own personal capital structure is concerned. Especially when compared to the various subordinated debt owed by the borrower.
In case the borrower’s investments in the property market do not pan out as well as he thought they would or for that matter, and moreover, if events come to such an impasse that he has to file for bankruptcy then the senior debt that he owes to his sundry lenders must (at least theoretically) be repaid well before any other creditor will be able to receive any sort of payments.
In other words, we can also state that senior debt is basically borrowed money that the erstwhile property developer must be in a position to repay first and foremost should his venture fail and he ends up going out of business.
o How do we break down ‘senior debt’?
Virtually all types of senior debts are essentially secured by a pre-set business as per an already pre-decided interest rate as well as time period, in which the aforementioned debt will have to be repaid.
The property developer in question will of course have to provide not only completely regular principal but also interest payments to the lending institution (or institutions as the case may be) based on the already decided upon schedule.
In a nutshell all forms of senior debts are the borrowers’ very first level of liabilities, that he must pay, ‘before’ he can pay any other creditors. In fact, such debts are almost always well secured by some sort of lien against collateral (mostly properties and real estate). From the lenders’ point of view, it makes the debt a lot less risky, and also gives them an added layer of protection. The Stamford Capital senior debt provider is one of the best senior debt providers in the country and they have a whole lot of experience in this regard.
Apart from that, many senior debt holders sometimes are also able to voice their opinions with regard to the nature and scope of the subordinated debt that any borrower can have. This is done to safeguard their own interests in case the borrower becomes insolvent and has too many debts that he has to pay off.