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An Intercreditor Agreement sets the ground rules between multiple lenders who are lending money to the same borrower. In the UAE's banking sector, these agreements are crucial when companies take loans from different banks or financial institutions, especially in large corporate financing deals or Islamic finance arrangements.

The agreement spells out important details like which lender gets paid first if the borrower defaults, how secured assets are shared, and what actions lenders can take during financial difficulties. Under UAE law, these agreements help prevent conflicts between conventional and Islamic lenders, while ensuring compliance with both civil law principles and Sharia requirements for debt arrangements.

You need an Intercreditor Agreement when multiple lenders are financing the same UAE-based project or borrower. This is especially common in large real estate developments, infrastructure projects, or when companies seek both conventional and Islamic financing simultaneously.

The agreement becomes essential before closing any multi-lender deal, particularly when lenders have different security interests or lending priorities. For UAE transactions, timing is critical - put the agreement in place before any funds are disbursed to prevent disputes over repayment rankings, enforcement rights, or Sharia compliance issues. This protects all parties' interests and establishes clear protocols for handling default scenarios.

• Senior-Subordinate Structure: Common in UAE corporate financing, defining payment priorities between primary and secondary lenders
• Pari Passu Arrangement: All lenders share equal rights and priorities, often used in syndicated loans within UAE banking
• Islamic-Conventional Hybrid: Specially structured to accommodate both Sharia-compliant and conventional lending arrangements
• Project Finance Type: Used for large UAE infrastructure projects with multiple funding sources and complex security arrangements
• Mezzanine Debt Structure: Addresses the relationship between senior lenders and mezzanine financiers in UAE real estate development

• Senior Lenders: Usually major UAE banks or financial institutions that provide the primary financing and typically have first priority in repayment
• Subordinate Lenders: Secondary financing providers, including Islamic banks and mezzanine financiers, who agree to take lower repayment priority
• Legal Counsel: UAE-qualified lawyers who draft and negotiate the agreement terms, ensuring compliance with local banking regulations
• Corporate Borrowers: UAE companies receiving multiple loans, responsible for adhering to the agreement's terms
• Security Trustees: Entities managing the security interests on behalf of multiple lenders under UAE trust principles

• Lender Details: Gather full legal names, registration numbers, and lending amounts for all participating UAE banks and financial institutions
• Security Information: Document all collateral, guarantees, and their respective rankings under UAE law
• Payment Priorities: Define clear payment waterfall structures and enforcement rights for each lender class
• Sharia Compliance: Confirm if any Islamic finance requirements apply and gather relevant fatwa certificates
• Default Protocols: Establish specific procedures for default scenarios, including voting rights and enforcement mechanisms
• Regulatory Checks: Verify compliance with UAE Central Bank regulations and local banking laws

• Parties Section: Full legal names and details of all lenders, borrowers, and security agents under UAE law
• Priority Rankings: Clear definition of payment priorities, security interests, and enforcement rights
• Standstill Provisions: Specific terms limiting individual lender actions during default scenarios
• Security Sharing: Detailed arrangements for sharing collateral and enforcement proceeds
• Default Procedures: Step-by-step protocols for handling defaults and debt restructuring
• Governing Law: Explicit choice of UAE law and jurisdiction provisions
• Sharia Compliance: Specific clauses ensuring compatibility with Islamic finance principles if applicable

An Intercreditor Agreement differs significantly from a Consortium Agreement, though both deal with multiple parties in complex financial arrangements. While Intercreditor Agreements focus on managing relationships between different lenders, Consortium Agreements govern partnerships between multiple organizations working together on a project.

• Purpose and Scope: Intercreditor Agreements specifically handle lending priorities and security interests, while Consortium Agreements cover broader operational collaboration and resource sharing
• Party Relationships: Intercreditor Agreements manage competing creditor interests, whereas Consortium Agreements coordinate equal partners working toward common goals
• Legal Framework: Under UAE law, Intercreditor Agreements primarily operate within banking regulations and secured lending rules, while Consortium Agreements fall under general commercial and partnership laws
• Risk Management: Intercreditor Agreements focus on default scenarios and debt recovery, while Consortium Agreements address project execution risks and shared liabilities