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Subordination Of Debt Agreement Template for United Arab Emirates

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Key Requirements PROMPT example:

Subordination Of Debt Agreement

"I need a Subordination of Debt Agreement under UAE law for a construction company with multiple creditors, where three junior creditors will subordinate their combined debt of AED 15 million to a senior bank loan of AED 50 million, with the subordination period ending in March 2025."

Document background
A Subordination of Debt Agreement is essential in complex financing arrangements where multiple creditors have claims against the same debtor. This document, governed by UAE law, establishes a clear hierarchy of debt and sets out the terms under which junior creditors agree to subordinate their claims to those of senior creditors. It is commonly used in corporate restructurings, acquisition financing, and project finance transactions within the UAE. The agreement includes detailed provisions on payment restrictions, enforcement rights, and turnover obligations, all structured to comply with UAE commercial and bankruptcy laws. It is particularly crucial in scenarios where companies are seeking additional financing while maintaining existing debt relationships, or during debt restructuring processes.
Suggested Sections

1. Parties: Identification of all parties including Senior Creditor(s), Junior Creditor(s), and the Debtor

2. Background: Context of the existing debts and reason for subordination

3. Definitions: Definitions of key terms including Senior Debt, Junior Debt, Subordination Period

4. Subordination: Core provisions establishing the subordination of the junior debt to the senior debt

5. Restrictions on Junior Debt: Limitations on payments, enforcement actions, and modifications of junior debt

6. Payments and Turnover: Rules regarding payments received by Junior Creditor and obligation to turn over certain payments

7. Representations and Warranties: Standard representations by all parties regarding authority, enforceability, and debt status

8. Covenants: Ongoing obligations of the parties during the subordination period

9. Events of Default: Circumstances constituting default and consequences

10. Termination: Conditions for termination of the subordination arrangement

11. Governing Law and Jurisdiction: Specification of UAE law as governing law and jurisdiction for disputes

Optional Sections

1. Security Arrangements: Required when the subordination involves secured debts, detailing the priority of security interests

2. Intercreditor Provisions: Needed when there are multiple creditors at different levels of priority

3. Assignment and Transfer: Include when parties want to specifically address the ability to transfer rights under the agreement

4. Further Assurance: Include when additional documentation or actions may be needed in the future

5. Costs and Expenses: Include when there's a need to specify responsibility for costs related to the agreement

6. Amendments and Waivers: Include when specific amendment procedures are required beyond standard provisions

Suggested Schedules

1. Details of Senior Debt: Schedule listing all senior debt facilities, amounts, and key terms

2. Details of Junior Debt: Schedule listing all subordinated debt facilities, amounts, and key terms

3. Form of Accession Deed: Standard form for additional parties to join the agreement

4. Security Documents: List and copies of relevant security documents if applicable

5. Notice Requirements: Specific forms and procedures for various notices under the agreement

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓÆµ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

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Banking & Finance

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Legal

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Relevant Roles

Chief Financial Officer

Finance Director

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