1. Types of Subordinated Debt
Now, if we again, bring in a capital stack, let's now focus our
attention on subordinated subordinated. Subordinated death that often is
used to fill a funding gap, meaning the company has
maxed out the amount of senior debt that's available, so then it goes
to subordinated debt for additional capital. Now, there can be lots of different
types of subordinated, like high yield bonds, mezzanine debt, which is Warrantless
or warranted, pick notes, which stand for payment in kind notes or vendor
notes. So now we've stacked the subordinated debt in order so that there
is more subordination towards the bottom with the vendor notes, and these
more subordinated investors would obviously demand a higher rate of return.
And we could also put a line through these various pieces of subordinated
debt to show the ones that could result in dilution, showing that there
could be increased dilution as we tend down towards the vendor notes.
2. Let's practice!