Payment Blockage In Intercreditor Agreements

In a senior lender/junior lender scenario, the lenders will customarily enter into an intercreditor agreement to establish their respective rights when dealing with a common borrower. The intercreditor agreement will usually provide a restriction on the payments that the borrower can make to the junior lenders upon the occurrence of certain events of default under the senior lender credit agreement. These provisions are referred to as "payment blockage" provisions. If a payment blockage provision is triggered, all payments to the junior lenders will usually be blocked, even the payments the junior lenders may otherwise be entitled to receive, such as scheduled interest or ordinary course fees and expenses.