What priority do bondholders have in the event of company liquidation?

Bondholders typically have a priority that places them ahead of equity shareholders but below secured creditors in the event of company liquidation. This means that when a company is liquidated, bondholders are paid before equity shareholders receive any distribution. However, they are subordinate to secured creditors, who have claims backed by specific assets of the company.

In the hierarchy of claims, secured creditors rank first because they have collateral to back their claims. After secured creditors have been satisfied, bondholders can claim the remaining assets, making their position relatively secure compared to shareholders, who only receive payment if all other creditors have been paid in full. This structure reflects the risk associated with different types of investments, with bondholders generally taking on less risk than equity shareholders due to their priority in the capital structure.