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Answer: Both bondholders are repaid proportionally based on the amount owed.
In a bankruptcy scenario, senior unsecured creditors are treated as a single class, regardless of the maturity dates of their debt. This principle is known as *pari passu* (on an equal footing), meaning all creditors at the same level of the capital structure share pro rata in the repayment. Therefore, the fixed-rate bondholder and the FRN holder would be repaid proportionally to their respective claims, not based on maturity or outstanding amount.
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An analyst gathers the following information about a company with senior unsecured debt:
$50 million, 12 years to maturity$10 million, 2 years to maturityIn a bankruptcy scenario where the priority of claims is enforced, it is most likely that:
A
The fixed-rate bond is repaid first due to its earlier maturity.
B
Both bondholders are repaid proportionally based on the amount owed.
C
The FRN is repaid first because it has the highest amount outstanding.