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An Intercreditor Agreement sets out the rights and priorities between different lenders who have provided loans to the same borrower. It's commonly used in UK business financing when a company has multiple loans, establishing who gets paid first if things go wrong.

These agreements are especially vital in secured lending arrangements under English law, where they specify which lender's security takes precedence, how loan enforcement decisions are made, and when junior lenders can take action. They protect both senior and junior lenders by creating clear rules about payment waterfalls, voting rights, and standstill periods during financial difficulties.

An Intercreditor Agreement becomes essential when your company takes on multiple loans from different lenders, particularly in leveraged finance deals or complex refinancing situations. For example, when securing both bank debt and mezzanine financing, or when bringing in additional lenders to fund expansion plans.

Use this agreement before finalizing any multi-lender arrangements under English law - it's crucial to have it in place before the first drawdown. It's particularly important in scenarios involving both secured and unsecured debt, or when mixing institutional lenders with private credit providers, as it prevents future disputes over payment priority and enforcement rights.

• Senior-Junior Structure: Most common in UK corporate lending, establishing clear payment priority between primary bank lenders and subordinated creditors
• Pari Passu Arrangements: Used when multiple lenders share equal ranking and security rights, common in syndicated loan deals
• First Lien-Second Lien: Popular in leveraged buyouts, defining strict hierarchy between different security holders
• Split Collateral: Assigns different security interests to separate groups of lenders, often used in asset-based lending
• Unitranche Variations: Combines senior and junior debt into a single facility, with lender relationships governed by an "Agreement Among Lenders"

• Senior Lenders: Usually banks or institutional lenders who hold first-ranking security and primary repayment rights
• Junior Lenders: Mezzanine financiers, hedge funds, or alternative lenders who accept subordinated positions
• Corporate Borrowers: Companies receiving multiple layers of debt financing who must comply with the agreed payment hierarchy
• Security Trustees: Hold and manage security interests on behalf of multiple lenders under English law
• Legal Counsel: Draft and negotiate Intercreditor Agreements, typically from major City law firms with expertise in secured lending

• Loan Details: Gather all facility agreements, amounts, interest rates, and security arrangements for each lender
• Payment Priority: Define the waterfall structure and conditions for sharing recoveries between creditors
• Security Rights: List all existing and proposed security interests, their ranking, and enforcement mechanisms
• Voting Thresholds: Determine majority lender definitions and consent requirements for key decisions
• Standstill Provisions: Specify periods during which junior creditors cannot take enforcement action
• Exit Rights: Set out permitted transfer scenarios and buyout options for different creditor classes

• Parties and Definitions: Clear identification of all lenders, borrowers, and security trustees with precise defined terms
• Debt Rankings: Explicit hierarchy of different debt classes and payment priorities
• Security Provisions: Details of security sharing, enforcement rights, and turnover obligations
• Payment Mechanics: Specific waterfall provisions and permitted payment conditions
• Enforcement Rules: Triggers, standstill periods, and majority lender consent requirements
• Governing Law: Express choice of English law and jurisdiction clauses
• Amendment Terms: Clear procedures for modifications and required consent levels

An Intercreditor Agreement differs significantly from a Bond Purchase Agreement, though both deal with debt financing arrangements. While Intercreditor Agreements manage relationships between multiple lenders, Bond Purchase Agreements focus on the single relationship between bond issuers and purchasers.

• Scope of Parties: Intercreditor Agreements involve multiple lenders with different priorities, while Bond Purchase Agreements typically involve just one issuer and one or more purchasers
• Purpose: Intercreditor Agreements establish payment hierarchies and enforcement rights, whereas Bond Purchase Agreements set terms for the initial sale of bonds
• Timing: Intercreditor Agreements remain active throughout multiple debt facilities' lives, while Bond Purchase Agreements primarily govern the initial transaction
• Enforcement Mechanics: Intercreditor Agreements contain complex waterfall provisions and standstill periods, while Bond Purchase Agreements focus on subscription mechanics and payment terms