Absolute priority

Absolute Priority Rule
Absolute Priority Rule definition :
Rule in bankruptcy proceedings requiring senior creditors to be paid in full before junior creditors receive any payment.
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Absolute priority
Rule in bankruptcy proceedings whereby senior creditors are required to be paid in full
before junior creditors receive any payment.
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Absolute Priority
The principle in bankruptcy proceedings that requires senior creditors to be fully paid before junior creditors and stockholders may receive any payment.
Also known as liquidation preference.

Business Definition for: absolute priority rule
Dictionary of Finance and Investment Terms
absolute priority rule ...

ABSOLUTE PRIORITY - the order of payment to the different classes of creditors mandated by the Bankrupt...
ABSOLUTE TITLE - a clear title that is free of any liens or judgments. A clear title is normally requir...

Absolute priority
Definition: The rule which says that, with regard to being paid back, lenders and creditors to a corporation get in line ahead of shareholders in the unfortunate event that a company goes out of business.

Absolute Priority - A rule that stipulates the order of payment - creditors before shareholders - in the event of liquidation.

Rule of Absolute Priority
A condition of bankruptcy proceedings under which junior (subordinated) claim holders can receive no payment until senior (priority) claim holders are paid in full.
Rules of fair practice ...

Permits corporations to file a registration for securities they intend to issue in the future when market conditions are favorable. See: Shelf registration.
Rule of Absolute Priority ...

absolute priority rule The absolute priority rule specifies the peeking order of creditors during bankruptcy... absorbed The term is applied in financial context similarly to its laymen use1 When business...

This is particularly relevant in liquidation analysis, since using absolute priority in a bankruptcy all securities senior to the equity have par claims.

When a company is liquidated, creditors receive distributions based on the absolute priority rule to the extent that assets are available.

In accordance with the absolute priority rule, under a Chapter 7 bankruptcy, shareholders are paid after creditors. With a Chapter 7 bankruptcy, a company will need to stop all business activities and turn over its assets.

See also: Expense, Banks, Asset pricing model, Saving, Asset class