Response to Query on Trust Preferred: Junior Debt Is Subordinated to More Senior Debt

I wanted to answer a query.  A Trust Preferred security, as I use that term, is a junior debt security, superior in rank to regular (equity) preferred and to common stock.  It is subordinated to all debt higher in the chain of priority which would include all senior unsecured debt and secured debt.  As debt, the distributions made will be taxable as interest.  An example would BACPRX which is a Trust Preferred security issue by Bank of America Capital, a Delaware Trust, formed and controlled by Bank of America that bought junior subordinated debentures from BAC  with a 7% coupon maturing in 2032.  Prepared by R.R. Donnelley Financial -- Bank of America-Capital Trust III Supplement  The Trust then sells capital securities to the public representing an undivided interest in that junior subordinated debenture.  In this context subordinated means subordinated to any debt more senior than junior debt which, as I said, would be all senior and secured debt. In the above linked prospectus, the ranking of this Trust Preferred is explained at p. S-7. 

 It is my understanding that this Trust Preferred would be senior to BACPRE for example which is an equity preferred which sits between common stock and junior debt in the chain of priority.  I hope that answers your question.