Senior Secured Debt

Definition

Senior secured loans typically have priority claim on cash flows and assets in the event of distress. Collateral can include accounts receivable, inventory, real estate, or enterprise assets depending on structure. Seniority and security generally improve recovery prospects compared to subordinated debt or equity. Allocator Context Allocators often view senior secured strategies as more defensive within private credit, but still evaluate underwriting rigor, sponsor quality, industry risk, and documentation. “Senior secured” is not a guarantee of safety—recovery depends on collateral quality, leverage level, and cycle conditions. Decision Authority Allocations to senior secured strategies are evaluated within credit sleeves and risk limits. Committees often want clarity on leverage, covenant protections, and historical loss experience under stress conditions. Why It Matters for Fundraising Managers improve credibility by describing what “senior secured” means in practice: collateral package, loan-to-value discipline, covenant standards, and workout capabilities. Key Takeaways Higher priority and collateral-backed claim Recovery depends on leverage and collateral quality Underwriting and covenants remain decisive Often positioned as defensive credit exposure