The Importance Of Intercreditor Agreements

What is an Intercreditor agreement?

An Intercreditor agreement outlines the rights and obligations of multiple creditors when lending to the same borrower. These are often referred to interchangeably as Deeds of Priority, however, an intercreditor agreement tends to be a more complex document which does not merely order the priority of debt and distribute the proceeds upon a default of the borrower.

Intercreditor agreements also include undertakings between the senior and junior creditors, requiring the subordinate (junior) lender to refrain from taking certain actions, and to prevent the borrower from making payments to the junior lender. The nature and extent of such undertakings will vary between lenders and can often be a point of negotiation.