In the hierarchy or priority of a company's securities, the ﬁrst and the last capital providers to get a claim on the assets of a bankrupt company are___________and____________respectively.
A)Senior unsecured debt holders / Preference share holders
B)Second lien loan holders / Ordinary equity holders
C)Senior secured debt holders / Ordinary equity holders
D)Senior secured debt holders / Subordinated debt holders
E)Senior unsecured debt holders / Shareholder loans

Question

Quizplus · Accepted Answer

In a bankruptcy scenario, the senior secured debt holders are the first to get a claim on the assets of the company as they have provided loans to the company with their assets as collateral. Next in line are the ordinary equity holders who own shares in the company. Therefore, choice C is the correct answer. Choice A is incorrect as preference share holders are ranked after senior debt holders. Choice B is incorrect as second lien loan holders are ranked below senior secured debt holders. Choice D is incorrect as subordinated debt holders have a lower priority than senior secured debt holders. Choice E is incorrect as shareholder loans are typically unsecured and hold a lower priority than senior unsecured debt holders.

In the Hierarchy or Priority of a Company's Securities, the ﬁRst