Super-Senior Debt : Greed & Avarice

An interesting article on super-senior debt.

First, a brief note of explanation. The concept of super-senior debt was essentially invented by creative bankers about four years ago to refer to the chunk of debt that sits at the very top of the capital structure of a collateralised debt obligation. It is the bit that gets paid off first, before other investors, if the CDO ever defaults. In theory, it makes this debt super-safe; indeed, so secure that rating agencies have been happy to give super-senior CDO debt a AAA tag, irrespective of what lay inside the CDO.