Superpriority Debt
Superpriority debt is debt given a priority position ahead of specified existing obligations through contractual lien or payment arrangements, a liability-management transaction, or, when applicable in bankruptcy, a court-approved debtor-in-possession financing structure.
Superpriority financing can provide urgently needed liquidity
A distressed borrower may be unable to raise new money at the same priority as existing debt because new lenders expect too little recovery. Offering a position ahead of existing claims can make new financing possible, but it transfers recovery value away from debt that becomes junior.
Out-of-court priority depends on the documents
Credit agreements can contain baskets, amendment provisions and lien flexibility that permit new priority debt with the required lender consent. Other agreements contain anti-priming or anti-uptier protections intended to block or require broader consent for such transactions.
Bankruptcy superpriority is a different framework
Chapter 11 DIP financing can receive superpriority claims or priming liens with bankruptcy-court approval and statutory protections. A DIP facility should not be used as proof that an out-of-court borrower can unilaterally prime existing lenders.
Roll-ups can pair old debt with new money
Current 2026 DIP and stressed-financing structures include roll-up loans that convert specified prepetition claims into the new priority facility alongside fresh capital. That can improve the participating lender old-debt recovery while providing new liquidity.
Priority changes recovery sensitivity
Assume $700 million of collateral supports $150 million of superpriority debt plus $650 million of previously first-lien debt. If collateral realizes $700 million before costs, the superpriority tranche can be paid first and only $550 million remains for the old first-lien class. The priority shift changes loss allocation even though total debt increased by only $150 million.
Common mistakes
Treating superpriority as one standardized rank The legal mechanism and scope vary.
Assuming priority can be created without consent or authority The governing documents or bankruptcy order must support it.
Treating DIP priority and out-of-court priming as identical They arise under different frameworks.
Example
A stressed borrower has $800 million of first-lien debt. A permitted restructuring raises $150 million of new-money debt that becomes contractually senior in lien priority to the old first-lien debt. The original lenders are now economically junior to the new superpriority tranche with respect to shared collateral.
Example
A stressed borrower has $800 million of first-lien debt. A permitted restructuring raises $150 million of new-money debt that becomes contractually senior in lien priority to the old first-lien debt. The original lenders are now economically junior to the new superpriority tranche with respect to shared collateral.
Professional note
Ask how the priority was created. Contract amendment, intercreditor agreement, collateral transfer and bankruptcy priming orders rely on different legal mechanisms.
Related terms
- Senior Secured Debt
Senior secured debt is debt that is senior in the borrower’s contractual capital structure and secured by liens on specified collateral, giving lenders a claim against pledged assets subject to lien priority, intercreditor arrangements and applicable law.
- First-Lien Debt
First-lien debt is secured debt that holds the first contractual lien priority over specified collateral, subject to permitted liens, equal-priority obligations and the governing intercreditor and security documents.
- Intercreditor Agreement
An intercreditor agreement is a contract among creditor groups, agents or collateral representatives that establishes their relative rights with respect to shared collateral, payment priority, enforcement, releases and other creditor-to-creditor matters.
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