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Effective subordination refers to a legal or financial arrangement where a creditor agrees to subordinate their claim to that of another creditor, typically to facilitate additional financing or restructuring. This means that in the event of liquidation or bankruptcy, the subordinated creditor will be paid after the senior creditors have been compensated. It is often used in corporate finance to help companies manage debt and improve their capital structure while attracting new investors. This practice can enhance a company's creditworthiness and financial stability by prioritizing certain debts over others.

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5d ago

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