Since senior debt always takes precedence, it will be paid off in full.
Thus, $2.25m - $2m = $0.25m
Therefore, subordinated debt holders will receive just half of their total claim.

Things to Remember

• Senior debt holders have the first claim on a company's assets in case of liquidation
• Subordinated debt holders are paid only after senior debt holders have been paid in full
• In case of liquidation, the value of a firm's assets may not be sufficient to cover all debts, leading to losses for debt holders
• Subordinated debt is considered riskier than senior debt due to its lower priority in the repayment hierarchy