Security over assets of the company.

Senior secured corporate bonds are the most secure piece of a company’s capital structure and have first priority and security over the company’s assets ahead of unsecured high yield or mezzanine debt and equity holders.

Unsecured corporate bonds (high yield variety) are usually second ranking and subordinated to senior secured bonds or bank loans. This subordination creates greater risk for investors in the event of a borrower’s financial difficulties but the bonds are usually priced with a higher coupon relative to senior debt to compensate for this risk.