Subordinated debentures are a type of debt instrument that companies issue to raise capital. Unlike regular bonds, these debentures have a lower priority in the event of liquidation, meaning they are repaid after other debts are settled. This higher risk often results in higher interest rates for investors. Investors in subordinated debentures may receive attractive returns, but they should be aware of the increased risk. If the issuing company, such as a corporation, faces financial difficulties, holders of subordinated debentures may not get their money back until senior debt holders are paid.