What is an intercreditor agreement?

An intercreditor agreement is a legal document that governs the relationship between two or more creditors who hold a claim against the same borrower or debtor. It outlines the rights and obligations of each creditor and how they will work together to recover their debt in case of a default.

The agreement typically includes provisions on the order of payment, collateral, priority, and subordination between creditors. It also addresses issues related to enforcement and remedies, such as foreclosure, bankruptcy, or liquidation.

Intercreditor agreements are common in situations where multiple lenders provide financing for a single project or transaction, such as in leveraged buyouts, syndicated loans, or asset-based lending. They help minimize the risk of disputes and ensure a coordinated and efficient approach to debt recovery.

The terms of an intercreditor agreement vary depending on the specific situation and the parties involved. They may be negotiated directly between the creditors or through an agent or trustee. In any case, it is important to carefully review and understand the terms of the agreement before signing, as they can have significant implications on the recovery of your debt.