The Importance Of Intercreditor Agreement Drafting

The case of Re Arboretum Devon (RLH) Ltd (28 April 2021) concerned a challenge to the validity of the ranking of the parties to an intercreditor agreement, the outcome of which signified the importance of intercreditor agreements and their drafting.

An intercreditor agreement (“ICA”) can be a very powerful tool and it can limit or prohibit unwary creditors from being able to take action and recover debt. In the case of Re Arboretum Devon (RLH) Ltd (in which Shoosmiths acted for the successful respondent parties) there were three issues of particular note:

The power that a senior creditor can get from an ICA;

The interpretation of the wording “pursuant to … [a Finance Document]” may be much wider than the documented loan;