Types of Debt, Equity & Returns in the Capital Stack

Learn the intricacies of subordinated debt and its role within the capital stack. This video provides a detailed breakdown of senior debt, subordinated debt, and equity, explaining their priority and return profiles. Senior and subordinated debt refer to their rank in a company's capital stack. In the event of a liquidation, senior debt is paid out first, while subordinated debt is paid out after. Mezzanine debt is a non-tradeable security that is subordinated to senior debt. Learn: The returns and equity upside offered by mezzanine debt. The difference between investment-grade and high-yield bonds. How senior debt enhances equity returns and its typical funding proportions. The structure and components of senior debt, including revolving credit facilities and term loans. Key metrics for constructing a strong capital structure, such as debt-to-EBITDA and interest coverage ratios. Subordinated debt types, from high-yield bonds to mezzanine finance, and their associated risks, returns, and equity dilution. Chapters: 00:00 - Capital Stack Overview 00:27 - Senior Debt Components 01:23 - How Senior Debt Can Enhance Equity Returns 02:44 - Types of Subordinated Debt 03:52 - How Much Subordinated Debt a Company Can Handle 04:49 - High-Yield Bonds 06:14 - Mezzanine Debt Characteristics 07:01 - Mezzanine Debt Returns 07:58 - Further Learning Resources You can learn more about this topic here: https://corporatefinanceinstitute.com... See how the concepts of debt, equity, and returns discussed come to life in real-world applications:    • Leveraged Buyout (LBO) Model Tutorial   The step-by-step guide above will show you how private equity firms use leverage to maximize returns, building directly on the capital stack principles covered in this video. #Debt #Equity #Returns #CapitalStack #CorporateFinance