In corporate finance, structural subordination is the concept that a

lender A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property ...

to a company will not have access to the

asset In financial accountancy, financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value ...

s of the company's

subsidiary A subsidiary, subsidiary company or daughter company is a company owned or controlled by another company, which is called the parent company or holding company. Two or more subsidiaries that either belong to the same parent company or having a s ...

until after all of the subsidiary's

creditor A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property ...

s have been paid and the remaining assets have been distributed up to the company as an equity holder. For example, if a lender lends money to a

parent company A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies ...

, then that lender is structurally subordinated to a lender who lent money to a subsidiary of the parent. The lender to the subsidiary is structurally senior, and the lender to the parent can only be repaid from the assets of the subsidiary after the lender to the subsidiary has been repaid.

References

{{reflist Corporate finance