Intercreditor Agreements: Key Areas Of Negotiation

In today's market, companies frequently secure financing from multiple lenders. This can create the need for an intercreditor agreement in which two or more lenders set out their relative rights and priorities regarding their common borrower. 

Below are five key areas of negotiation for Canadian intercreditor agreements:

1. Relative Priorities. In intercreditor agreements, both secured and unsecured lenders should agree on the order in which payment will be made on their obligations. Secured lenders should also agree on the priority of the security interests granted to each of them by the borrower. 
2. Access to Collateral.  Lenders' rights to access collateral are most relevant in a split collateral deal, in which security is taken over different assets of a shared borrower. Intercreditor agreements between fixed-asset and working-capital lenders often require working-capital lenders to compensate fixed-asset lenders for their occupation of the real property and