Subordinated loans attraction

According to the normative regulation of some countries, SUBORDINATED LOAN is understood as funds issued to the borrower to increase its working capital for a term exceeding 10 years.

Used to calculate capital base, as well as to raise reserves for doubtful and bad debt, subordinated loans are accounted by the borrower as internal funds.

At liquidation of any credit institution having subordinated loans as liabilities, the appropriate funds can be used for satisfy claims of creditors in case the authorized capital, redundant capital, and other components of equity will be insufficient to settle its obligations. In any other case, if the purpose of the funds provided was not prescribed in the credit agreement, spending of a subordinated loan requires the written approval of the creditor.

Related practices

• Structure Finance
• Syndicated and bilateral lending
• Banking
• Licensing (Banking)