What Is An Inter Creditor Agreement
A senior debt credit agreement consists of sensitive issues, such as interest charges, costs and allowances, which favour the priority lender over junior lenders. It is also common for a primary lender to be able to modify them without the consent of a junior lender. Therefore, a junior lender should negotiate a cap on the amount of priority debt and ensure that there is a clause preventing the priority lender from changing the terms of the priority loan. Another provision of the inter-creditor agreement could be a stalemate. Subsequently, the junior lender is prevented from taking action against the borrower to enforce its debt. As a general rule, the restriction is to take action (require payment, take legal action, etc.) for a specified period of time. In addition, the status quo period extends until the execution process of the primary lender is opened. Sometimes the period extends to the full repayment of the priority debt. The agreement could also include repayment restrictions. A junior lender may agree that it would not require repayment before the full repayment of the priority debt, with the exception of interest or other payments, as agreed. A junior lender should apply for exemption from a certain class of collateral that a priority lender has not included in its asset base. Once it has been agreed that there will be a personal guarantee from the borrower`s client or a guarantee to the junior lender, the junior lender should ensure that the agreed rights are properly reflected in the interbank agreement and do not stop. The interbank agreement plays a central role in the right to pledge.
It is therefore essential that both lenders establish a solid foundation for their rights and priorities in the event of a borrower`s financial capacity failure and late payment. In the absence of such a document, each party can make its own decisions and be inconsistent. The whole trial can be unethical and uneconomic and can quickly turn into a legal disorder in court. The inter-creditor agreement will also deal in detail with the rehabilitation of such problems, it is important that the junior lender evaluates the act in depth before approving it. In addition, the junior lender must negotiate the agreement fairly. If the efforts have not been profitable, the junior lender cannot accept the agreement and look for other options. If an original ICA is made up of 3 main creditors who are paid two principal creditors, can an inter-signed agreement with the same final benefits be maintained, when there is only one primary creditor left? Different types of transactions have different typical structures and types of debt, and there are also significant differences within each type of transaction.