[btilly]

It's part of breaking a loan into bonds, which is called securitization.

Suppose we divide the repayments into 5 bonds. If 20% of the money comes in, it goes to the first bond. Then the next 20% to the next, and so on. The later bonds are called subordinate - they only pay if the other ones already were paid off. Because they are riskier, the later ones aren't worth as much.

The actual rules are more complex than this toy example. But that's the basic idea. And this is how a risky loan is sold to different investors at different prices with different tolerances for risk/return.