Subordinate debt, also known as subordinated debt or junior debt, refers to a type of debt obligation that ranks lower in priority of repayment than senior debt in the event of bankruptcy, liquidation, or default. Subordinate debt holders have a subordinate or junior claim on a company's assets and cash flows compared to senior debt holders, who have priority in receiving repayment. Subordinate debt instruments may include subordinated bonds, debentures, or loans issued by corporations, governments, or financial institutions, offering higher interest rates or yields to compensate investors for the increased risk of potential losses or lower recovery rates in case of default. Subordinate debt is considered riskier than senior debt due to its lower priority in the capital structure and may require higher credit ratings, collateral, or covenants to mitigate default risk and secure financing. Subordinate debt plays a critical role in corporate finance, capital markets, and structured finance transactions, providing additional funding sources, enhancing capital adequacy, and supporting growth initiatives for businesses while offering investors diversification opportunities and potentially higher returns.