Negotiating Intercreditor Agreement

The intercreditator agreement, which was discussed below, also sets out the different rights and obligations of priority and mezzanine lenders. By focusing on the most important issues and addressing them at an early stage, a junior lender can ensure that it is protected in the unfortunate, though all too likely, scenario where a high-level lender is attempting to exercise its rights under an interbank agreement. In such a scenario, the government authority may act as a junior lender, the financial (s) as a priority lender and the company (Y) as a borrower. Since the company provides credit to the two financiers with the same property, the senior creditor will in any event want to enter into an intercreditor agreement with the government authority in order to protect its interests. Ince Gordon Dadds is active for priority lenders, mezzanine lenders and borrowers and has experience in advising inter-secretary agreements in all deal sizes. Payment subordination – in this case, a subordination agreement is required To find an appropriate previous borrowing document, it is important to consider: first, payment freezes should be limited to defaults and defaults for which the chief lender has accelerated lending. Other defaults, such as the breach. B of a financial agreement or the absence of necessary borrower certificates, should not serve as the basis for the payment ban (unless the principal lender has used its right to expedite the loan). High-level lenders will oppose this position. Second, payment bans should be limited for 90 to 180 days, depending on the type of junior capital. Third, there should be no more than one blockade for a given standard.

Fourth, the number of total blockages allowed should be limited, regardless of the number of default settings. Two blockages per year and three or four blockages during the term of the loan (depending on the duration) are common. Fifth, while the junior lender will cede many rights to the primary lender in the event of bankruptcy, it should ensure that it has basic safeguards in place to accelerate its debt and improve its remedial measures. Finally, it is important to ensure that the payment freeze is to begin. Defaults on higher payments should be suspended immediately, but further defaults should only result in a freeze after informing the junior lender. On this point, the interbank agreement should adequately reflect that the junior lender is only required to return payments after the current blocking date (i.e., in most cases, after receiving the notification). While a lead lender proposes that some or all of these protections penalize subordination, they must ensure that the primary lender is not on its rights to the detriment of the junior lender. The junior lender should consider meeting the contractual terms for the project in the event of a delay in payment from the borrower. In the event of such a situation, the junior lender should be aware that there are usually only two options: either to inject funds into the project, to remedy financial defaults under the senior lender, or to pay the priority lender.

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