UK Accounting Glossary
finance An owner of a financial obligation of another party.
A debtholder is an investor who holds a debt instrument, most commonly a bond. With bonds, the terms bondholder and debtholder are used interchangeably. In the event of bankruptcy, ownership of the bond issuer transfers from stockholders to debtholders. If the bankruptcy results in complete liquidation, the debtholder is paid out of the proceeds first. The debt held by a debtholder can be senior debt or subordinated. A debtholder possessing senior debt is in the most secure position because senior debt obligations are paid ahead of subordinated ones. Default is not the only way for a debtholder to become a shareholder. With a convertible bond, the debtholder has a choice to convert the debt to shares of preferred or common stock.
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This glossary post was last updated: 7th February 2020.