Subordination Clauses in Bond Indentures

question 16

Multiple Choice

Subordination clauses in bond indentures

• A) may restrict the amount of additional borrowing the firm can undertake.
• B) are always bad for investors.
• C) provide higher priority to senior creditors in the event of bankruptcy.
• D) may restrict the amount of additional borrowing the firm can undertake and provide higher priority to senior creditors in the event of bankruptcy.
• E) All of the options are true.

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