Intercreditor Agreement Que Es

Intercreditor Agreement: What Is It and How Does It Work?

An intercreditor agreement, also known as an intercreditor deed, is a legal document that outlines the respective rights and obligations of two or more creditors with respect to a common debtor. This agreement is commonly used in situations where multiple lenders have provided loans to a borrower, and each lender wants to ensure that their interests are protected.

The purpose of an intercreditor agreement is to establish a clear hierarchy of claims in the event of default or bankruptcy. It helps to prevent conflicts between creditors by outlining the order in which each creditor will be repaid. This agreement also sets out the terms and conditions of each creditor`s loan, including any collateral that has been pledged.

One of the most important aspects of an intercreditor agreement is the subordination clause. This clause dictates the priority of each creditor`s claims in the event of default. Typically, senior lenders will have their claims prioritized over junior lenders. For example, if a borrower defaults on their loans, the senior lenders will have first priority to recover their funds before any junior lenders can make claims.

Another key provision of an intercreditor agreement is the shared security clause. This clause outlines how the collateral provided by the borrower will be shared between the creditors. This can be particularly important when dealing with complex assets such as real estate or equipment, where multiple lenders may have claims on the same property.

Intercreditor agreements can also include provisions related to voting rights, enforcement actions, and the appointment of an agent to act on behalf of the creditors. These provisions help to ensure that the creditors are able to work together effectively to protect their interests.

In conclusion, an intercreditor agreement is a critical document in situations where multiple lenders have provided loans to a borrower. By establishing a clear hierarchy of claims and outlining the terms and conditions of each creditor`s loan, this agreement helps to prevent conflicts and ensure that all parties are able to recover their funds in the event of default. If you or your clients are involved in lending or borrowing money, it`s important to understand the benefits of having an intercreditor agreement in place.