A senior tranche is the class of notes that ranks first in a securitisation or other structured financing. It has the first claim on the interest and principal collected from the underlying assets and is the last to suffer when those assets produce losses. It sits above any mezzanine tranche and the equity tranche, which must be wiped out before the senior notes lose money. The practice of dividing a deal into ranked classes is described under tranching.
Because of this protection, a form of credit enhancement, the senior tranche usually carries the deal's highest credit rating and pays the lowest yield. Its priority is set out in the securitisation waterfall. A senior ranking is not a guarantee: in the 2007 to 2009 crisis, senior classes of some mortgage-related deals suffered losses when defaults far exceeded the assumptions used to rate them.