Intercreditor issues in finance transactions

This overview is a guide to the Banking & Finance content within the Intercreditor issues in finance transactions subtopic, with links to the appropriate materials.

Purpose of intercreditor arrangements in finance transactions

Commercial finance transactions, such as leveraged finance, structured real estate finance and project finance transactions are often funded from a number of different sources. Common sources of funding are:

•
equity (this will typically comprise equity in the form of share capital and quasi-equity in the form of subordinated debt instruments such as loan notes)
•
senior debt
•
junior debt, and
•
high yield bonds

Where multiple sources of debt are used, there will be a number of different types of creditor and each of these will want to protect its own interests. The principal purpose of the intercreditor agreement is to contractually regulate the relationship between the different types of creditors.

Intercreditor agreements deal with a number of issues including:

•
the order in which the debt claims of each class of creditor will rank, and
•
the order of entitlement of each class of secured creditor to the proceeds of any security

Arrangements

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