Subordination and the senior non-preferred supplement

Indra Rajaratnam


This chapter explores the meaning of the term “subordination” and the method by which the “not-subordinated” characteristic is determined, including the implications of incorporating the 2020 Limited Recourse Additional Provisions (International Swaps and Derivatives Association Inc. 2020c), into the terms of a transaction. The chapter also examines the hierarchical fallback structure that may be applied to determine the benchmark obligation for use as the comparison obligation in any subordination analysis if there were no reference obligation and how the ranking of a transaction is determined. Towards the end of the chapter, the “Additional Provisions for Senior Non-Preferred Reference Obligations” (International Swaps and Derivatives Association Inc. 2017b; henceforth, the “Senior Non-Preferred Supplement”) to enable debt of a reference entity to be traded at three levels of seniority (including the “senior non-preferred level”) are evaluated.


“Subordination” is an important concept within the landscape of a CDS transaction, as it relevant to determinations relating to the “not-subordinated” characteristic. A change

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