What is an Intercreditor Agreement Review?
An intercreditor agreement is a private legal agreement between creditors who share the same borrower. It specifies important aspects of their dealings, such as by stating which creditor will receive payments from the borrower before others.
Since it deals with payment preferences, it should be clear and specific to prevent disputes or other challenges.
Read the rest of this article for information about how to review an intercreditor agreement. We’ll look at some common terms to review, general tips for reviewing the agreement, and how a qualified lawyer can assist you through the review process.
What are Key Terms to Include in an Intercreditor Agreement?
It’s common for an intercreditor agreement to contain the following key terms, which you should go through for accuracy.
- Priority or Ranking. Check that the agreement lists the borrower’s debts according to their importance. This gives one creditor payment preference over another.
- Collateral. Identify details about what secures the lenders’ loans so that default processes can include distributing collateral.
- Sharing of information. The intercreditor agreement must detail how details, such as financial information, can be exchanged between parties.
- Standstill. A standstill provision prevents junior lenders from taking legal action against a borrower for a specific duration. This ensures senior lenders are prioritized and have more control.
- Definitions. It’s worth including a definitions section of terms appearing in the agreement so that parties understand everything included.
- Release. You should make sure the agreement specifies how creditors can be released from the agreement and changed.
How Do You Review an Intercreditor Agreement?
When reviewing an intercreditor agreement, you should consider some important aspects of the deal.
Check the Payment Priority
One of the most important elements of the intercreditor agreement is the payment priority for creditors. It should be clear how the creditor ranking works and who will be paid before others.
Outline Consent and Voting Rights
It’s important to include information in the agreement about how creditors can make decisions, such as approving waivers or assessing loan changes, should this be required. By establishing this in the agreement, you can prevent having to make changes to it in future.
Consider Rights to Collateral
The intercreditor agreement might include a rights to collateral clause, which you should review. This outlines the creditor’s rights to collateral, such as by stating that senior creditors will have access to certain assets should the borrower default. You want this to be clear and detailed so there’s no confusion over what assets are being described.
Think About Amendments
It’s worth considering restricting amendments to senior or junior debts as they could affect another creditor’s position. For example, the agreement might state that the senior creditor could amend provisions of the senior financing without requiring junior creditor consent as long as the changes don’t prejudice the junior creditor’s rights or priority.
Align it with Relevant Laws
One of the challenges when reviewing an intercreditor agreement is ensuring it complies with all the relevant laws and regulations. These rules must be researched prior to reviewing the contract as compliance will make the agreement valid and enforceable in the relevant jurisdiction. A lawyer can assist you with all compliance requirements.
How Does a Lawyer Review an Intercreditor Agreement?
A lawyer is worth hiring to review your intercreditor agreement so that they can protect your interests and prevent disputes. Here are some things a lawyer will do during the review process.
- They’ll confirm the ranking of creditors in the agreement and specify which claims take priority.
- They’ll review all relevant financial documents that affect the agreement, such as loan agreements, to ensure consistency.
- They’ll make sure the agreement clarifies what assets are secured and what security interests are held by creditors.
- They’ll ensure that it’s clear which creditors receive payment first after situations such as insolvency.
- They’ll establish if junior creditors are subject to any payment restrictions when receiving payments.
- They’ll add provisions to the agreement to protect your interests, such as by including standstill periods.
- They’ll consider any future risks that could arise, and include provisions to protect you.
- They’ll clarify any legal jargon or complex language so you understand everything in the document.
Where to Find a Lawyer for an Intercreditor Agreement Review
If you need to hire a lawyer to review an intercreditor agreement, you don’t have to worry that it will take time or be a stressful experience. Online legal platforms make it easy to access a network of lawyers who have contract-reviewing experience and can assist you.
ContractsCounsel is one of the largest online legal marketplaces that gives you access to a curated network of vetted lawyers. All lawyers on the platform have years of experience in contract drafting and review.
Best of all, it’s easy to ask a lawyer on the platform to review your intercreditor agreement. You don’t even have to leave your home. Here are the steps to follow online:
- Go to the ContractsCounsel marketplace.
- Post your project for free. Include a few details to help you find the most suitable lawyer, such as the debt owing or what sections of the agreement you’d like reviewed.
- Wait for bids. Instead of searching for a lawyer, you’ll receive multiple bids from lawyers directly on the platform.
- Review the lawyers’ profiles. You get to choose the lawyer you want to work with. Go through the platform’s extensive lawyer data, which includes their location, client ratings for previous projects, expertise, and credentials.
- Connect with a lawyer you think is best suited to your requirements and hire them to review your intercreditor agreement for a flat fee.
