Which claim receives contractual cash or liquidation proceeds first?
Module 06
Capital Stack and Recovery Waterfall
Learn seniority, security, payment priority, loss absorption and downside recovery through an interactive waterfall.
8capital layers
Top to bottompayment priority
Priority
Contractual claims descend; loss absorption rises.
Actual ranking depends on legal entity, governing law, security, guarantees, structural subordination and intercreditor terms.
01Senior secured debtFirst contractual claim; typically secured02First-lien / unitrancheSenior private or syndicated credit03Second-lien debtJunior security over shared collateral04Senior unsecured debtSenior claim without specific collateral05Subordinated debtContractually or structurally junior06Mezzanine / PIKHigher fixed claim with possible equity upside07Preferred equityPriority equity distribution or liquidation rights08Common equityResidual ownership and first-loss capital
Distress simulator
Recovery waterfall
Change enterprise value and claim amounts. The model allocates value from senior to junior layers.
Illustrative educational model; excludes transaction costs, taxes, interest accrual, intercreditor disputes, entity structure and jurisdiction-specific insolvency law.Three different hierarchies
Keep payment, security and control separate.
Which creditor can enforce against which assets, shares or cash flows?
Who holds votes, board rights, consent rights, covenants or enforcement rights?
Module 6 of 15
