Why do investors who buy subordinate debentures usually receive higher interest rates than other bond holders?

Investors who buy subordinate debentures typically receive higher interest rates because these securities carry a higher level of risk compared to senior debt. In the event of a company's liquidation or bankruptcy, subordinated debenture holders are repaid only after senior debt holders have been satisfied, increasing their potential for loss. As a result, to attract investors willing to take on this additional risk, issuers offer higher interest rates to compensate for the greater likelihood of default and lower priority in the capital structure.