What is meant by "secured debt" during the restructuring process?

Secured debt refers to obligations that are backed by specific assets, providing the lender with a claim on those assets in the event of default. This means that if the borrower fails to meet their payment obligations, the lender has the legal right to seize the specified collateral to recover their investment. This arrangement typically makes secured debt less risky for the lender compared to unsecured debt, which does not have specific collateral backing it.

In the context of restructuring, secured debt plays a critical role as it influences the bargaining power of creditors and the overall restructuring strategy. Lenders holding secured debt are often prioritized in the repayment hierarchy during a restructuring process, as their collateral reduces the financial risk they carry.

The other choices do not accurately represent the nature of secured debt. Specifically, unsecured debt lacks collateral backing (not A), forgivable debt is not a typical characteristic associated with secured obligations (not C), and interest rates do not define whether debt is secured or not (not D). Thus, the understanding of secured debt within a restructuring framework is crucial, as it affects how assets are allocated and prioritized throughout the process.