What is typically true regarding Junior Subordinated Debt?

Junior Subordinated Debt is characterized by its contractual designation as junior and subordinated, which means it ranks lower than other debt in the capital structure when it comes to repayment in the event of liquidation or bankruptcy. This subordination is intentional and explicitly outlined in the debt agreements.

In the context of capital structure, junior subordinated debt typically sits below senior secured debt and often below senior unsecured debt. This positioning is significant because it reflects a higher risk for investors; they will only be repaid after senior creditors have been satisfied. As a result, junior subordinated debt often offers higher yields to compensate for this increased risk.

Other options do not accurately describe junior subordinated debt. It is not always secured, and it certainly does not have the highest priority or rank equally with senior secured debt, both of which would imply a much lower risk profile than what is the reality for junior subordinated debt.