Glossary
Senior debt
Also called: senior loan, first-ranking debt
Senior debt is the loan that ranks first for repayment, usually secured by a first mortgage. In a development capital stack it sits below mezzanine debt and equity in risk, so it is repaid first from sale or refinance proceeds.
An example
A project is funded by a bank construction loan, a mezzanine facility and the developer's equity. The bank's loan is the senior debt and is repaid first when the completed units settle.
Why it matters
Senior lenders set the terms the other funders must work around, including the intercreditor deed and consent rights. Understanding the senior lender's conditions is the first step in structuring any additional funding.
Points to check
Ask the senior lender how it ranks against other funders and whether it permits subordinated debt or preferred equity. Check the conditions it imposes on any second-ranking funding, including intercreditor terms. Understand that the senior lender usually controls key decisions, such as extensions and enforcement, so its terms shape the whole project.