In
finance,
seniority refers to the order of repayment in the event of a sale or
bankruptcy of the issuer. Seniority can refer to either
debt or
preferred stock. Senior debt must be repaid before subordinated (or junior) debt is repaid. Each security, either debt or equity, that a company issues has a specific seniority or ranking. Bonds that have the same seniority in a company's
capital structure are described as being
pari passu. Preferred stock is
senior to common stock in a sale when preferred shareholders must receive back their
preference, typically their original investment amount, before the common shareholders receive anything.