Guide to intercreditor agreements
Here’s a quick guide to intercreditor agreements that will help you understand what they are and why they are important.
What is an intercreditor agreement?
An intercreditor agreement is an agreement which regulates the respective rights and ranking, including the priority of repayment, of all lenders, senior and subordinated in a financing.
What is included in an intercreditor agreement?
The agreement sets out the contractual rights of each of the lenders, whatever their jurisdiction, and will only be subject to overriding mandatory provisions of local insolvency laws.
It includes details like dispute resolution, various lien positions, responsibilities of the creditors, liabilities of each creditor, impact on the other creditors, etc.
Why are intercreditor agreements important?
Borrowers in European jurisdictions tend to have complex structures due to the multijurisdictional nature of the Eurozone. As a result, intercreditor agreements are a significant part of ensuring the rights of lenders and bondholder creditors are protected in the event of a default.