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Intercompany Subordination Agreement
"I need an Intercompany Subordination Agreement for a South African mining group with five subsidiary companies, where the parent company's debt needs to be prioritized over all subsidiary debt obligations, to be effective from March 2025."
1. Parties: Identification of the parties including the senior creditor(s), subordinated creditor(s), and the principal debtor company
2. Background: Context of the existing debts and reason for subordination arrangement
3. Definitions and Interpretation: Definitions of key terms including Senior Debt, Subordinated Debt, Trigger Events, and interpretation clauses
4. Subordination: Core subordination provisions including ranking of debts and payment restrictions
5. Duration of Subordination: Period of effectiveness and conditions for termination of subordination
6. Payments and Treatment of Subordinated Debt: Rules regarding permitted payments, blocked payments, and treatment of received payments
7. Turnover of Non-Permitted Recoveries: Obligation to turn over any payments received in breach of subordination
8. Undertakings: Key promises by the parties, including restrictions on debt enforcement and amendments
9. Preservation of Subordinated Debt: Provisions ensuring subordinated debt remains valid despite payment restrictions
10. Power of Attorney: Appointment of senior creditor as attorney to enforce subordination terms
11. Breach and Remedies: Consequences of breach and available remedies
12. General Provisions: Standard boilerplate clauses including notices, amendments, governing law
1. Security Provisions: Required if any security interests are involved in the debt structure
2. Further Subordinated Creditors: Mechanism for additional creditors to accede to the agreement
3. Exchange Control Provisions: Required for cross-border arrangements subject to South African exchange control
4. Tax Gross-up: Provisions dealing with withholding tax if applicable to payments
5. Regulatory Compliance: Specific provisions required for regulated entities
6. Subordinated Creditor Committee: Governance provisions if multiple subordinated creditors are involved
7. Restructuring Provisions: Specific provisions dealing with potential corporate restructuring scenarios
1. Schedule 1 - Details of Senior Debt: List and details of all senior debt facilities
2. Schedule 2 - Details of Subordinated Debt: List and details of all subordinated debt arrangements
3. Schedule 3 - Form of Accession Deed: Standard form for new creditors to join the agreement
4. Schedule 4 - Notice of Subordination: Form of notice to be given regarding the subordination arrangement
5. Schedule 5 - Group Structure Chart: Diagram showing relationship between all relevant group companies
6. Schedule 6 - Payment Terms: Detailed terms regarding permitted payments and payment calculations
7. Appendix A - Deed of Priority: If required, sets out detailed ranking and priority arrangements between creditors
Authors
Financial Services
Manufacturing
Mining
Retail
Technology
Telecommunications
Real Estate
Energy
Infrastructure
Healthcare
Agriculture
Professional Services
Legal
Finance
Treasury
Corporate Finance
Risk Management
Compliance
Company Secretarial
Tax
Accounting
Credit Control
Chief Financial Officer
Financial Director
Treasury Manager
Group Financial Controller
Legal Counsel
Company Secretary
Finance Manager
Corporate Finance Manager
Group Accountant
Risk Manager
Compliance Officer
Corporate Restructuring Officer
Investment Manager
Credit Manager
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