I would like to ask if different debt seniorities ( like senior unsecured bonds and subordinated bonds) have different probability of default?
(Before edited I used debt tiers instead of seniority but I guess that is not the correct terminology)
For example, my initial understanding was that different debt tiers have different priority in a case of a default and when the issuer defaults on a payment it is actually defaulting on all the debt that it has been issued. I was justifying that by assuming that when the company had to pay interest on a date and was unable to (for let's say subordinated bonds) it would actually be unable for all the different seniority of bonds but it would be obliged to pay the most senior ones. Hence issuer defaulting as whole and paying the most senior creditors.
But after reading an article regarding 2014 ISDA CDS definitions I saw that CDS contracts will be triggered based on the seniority of the debt that has been defaulted hence making my initial assumption incorrect and that different seniorities can default separately.
Any insight regarding this would be appreciated!!