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An Intercreditor Agreement sets the ground rules between multiple lenders who provide loans to the same borrower. It's like a playbook that spells out who gets paid first, who has rights to which assets, and how lenders will work together if things go wrong.

These agreements are especially common in complex financing deals where companies have both senior secured loans and subordinated debt. The document clearly defines each lender's rights to collect payments, enforce security interests, and take action during a default - helping prevent disputes and ensuring orderly debt collection under U.S. commercial and bankruptcy laws.

Use an Intercreditor Agreement any time multiple lenders are providing financing to the same borrower, especially when the loans have different priorities or security interests. This comes up frequently in leveraged buyouts, real estate development projects, and complex corporate refinancing deals where both banks and private lenders are involved.

Getting this agreement in place before closing the loans is crucial - it prevents costly disputes between lenders later. For example, when a senior lender holds first-position liens on company assets while subordinated lenders take second position, having clear rules about payment priorities and enforcement rights helps everyone avoid litigation if the borrower struggles.

• Payment Waterfall Agreements: Define strict payment priorities among lenders, spelling out who gets paid first from borrower payments or asset sales
• First Lien/Second Lien Agreements: Structure relationships between secured creditors with different priority levels on the same collateral
• Senior/Subordinated Agreements: Manage rights between senior bank lenders and junior bondholders or mezzanine lenders
• Split Collateral Agreements: Allocate different asset types to different lender groups, like inventory to one and equipment to another
• Unitranche Agreements: Blend multiple lending tiers into a single facility while privately setting lender priorities

• Senior Lenders: Usually banks or institutional lenders who hold first-priority security interests and initiate the agreement's creation
• Junior Lenders: Subordinated debt holders, mezzanine lenders, or bondholders who accept lower payment priority
• Corporate Borrowers: Companies receiving multiple layers of debt financing who must acknowledge the agreement
• Finance Lawyers: Draft and negotiate terms between lender groups, ensuring compliance with UCC and bankruptcy laws
• Loan Servicers: Manage payment distributions and enforce lender rights according to the agreement's terms

• Loan Details: Collect terms of all existing and proposed loans, including principal amounts, interest rates, and maturity dates
• Security Interests: Document all collateral pledged to each lender and their current lien positions
• Payment Priorities: Define the exact order of payment distributions and cash waterfall arrangements
• Enforcement Rights: Specify each lender's ability to take action during defaults or bankruptcy
• Standstill Provisions: Outline periods junior lenders must wait before exercising remedies
• Amendment Rules: Establish which changes require consent from which lender groups

• Parties Section: Clear identification of all lenders, their roles, and the borrower's details
• Lien Priorities: Explicit ranking of security interests and collateral rights among creditors
• Payment Terms: Detailed waterfall provisions showing order of payments and distribution rules
• Enforcement Rights: Specific actions each lender can take during default scenarios
• Bankruptcy Provisions: Rules for creditor conduct during bankruptcy proceedings
• Amendment Procedures: Required consent levels for modifying agreement terms
• Governing Law: Choice of state law and jurisdiction for dispute resolution

People often confuse an Intercreditor Agreement with an Asset Purchase Agreement, especially in complex financing transactions. While both documents appear in major business deals, they serve distinctly different purposes and involve different relationships.

• Primary Focus: Intercreditor Agreements manage relationships between multiple lenders, while Asset Purchase Agreements govern the sale of business assets between buyer and seller
• Timing of Use: Intercreditor Agreements remain active throughout the loan term, whereas Asset Purchase Agreements typically conclude once the sale closes
• Party Structure: Intercreditor Agreements involve multiple lenders and one borrower; Asset Purchase Agreements typically involve just one buyer and one seller
• Legal Effect: Intercreditor Agreements establish payment priorities and enforcement rights, while Asset Purchase Agreements transfer ownership and allocate risk in asset sales