Transfer restrictions: Senior and junior creditors must be able to transfer or transfer their rights and obligations under the Intercreditor agreement to a beneficiary or purchaser of priority or younger debt. As in the case of the Priority Debt Agreement against the Junior Intercrediteur, the same provisions should apply to the institutional investor, but only if an acquirer or assignee accepts the intercreator contract as an institutional investor/subordinate creditor. Before the agreement is signed, the junior lender must also specify the definition of “senior debt” and “junior retirement.” In addition, it is customary for a lead lender to process the terms of the agreement without the agreement of the junior lender. This is what the junior lender should keep in mind. Insolvency subordination: These provisions should be the same as in a priority debt in relation to the Junior Debt Intercreditor Agreement. The provisions are important to ensure that all institutional investor loans are given a lower priority, since equity capital is generally considered secondary in the event of insolvency. As a general rule, such an agreement limits the payment a borrower can make to junior lenders if the borrower is behind on the terms of the agreement with junior lenders. Such provisions are called “payment freezes.” This provision even limits payments to which junior lenders are entitled in the normal course of working with the borrower, such as interest or customary fees and expenses. The U.S. Securities and Exchange Commission publishes a model agreement on lenders. Priority to charges: if the subordinated creditor has the guarantee of impregnation, he must consider including in the security contract a provision that stipulates that the security of the priority creditor takes precedence.
Typically, there are two creditors in an inter-creditor agreement – one senior and the other a secondary or junior lender. Company A, for example, receives a loan from Bank A for a large project. Subsequently, Company A also receives a relatively modest loan from Bank B for further development of the same project.