A sample intercreditor agreement is a legal document that outlines how lenders will prioritize their claims in the event of a borrower defaulting on their loans. This agreement is typically used in situations where a borrower has taken on multiple loans from different lenders, and each lender wants to ensure that they will be repaid in the event of a default.
An intercreditor agreement typically determines which lender will have the first claim on a borrower’s assets in the event of a default, as well as the order in which other lenders will be paid. This agreement is important because it helps to minimize the risk for each lender involved and ensure that they will be paid according to the agreed-upon terms.
In addition to outlining the order in which lenders will be repaid, a sample intercreditor agreement may also include provisions related to communication and sharing of information between lenders. This can help to ensure that all parties involved are aware of the borrower’s financial situation and can make informed decisions about how to proceed.
Another common provision in an intercreditor agreement is a “standstill” clause, which effectively prohibits lenders from taking certain actions against the borrower without the consent of all parties involved. This clause can help to prevent a “race to the courthouse” among lenders seeking to recover their losses, which could ultimately harm the borrower and decrease the value of their assets.
It’s important to note that each intercreditor agreement will be unique to the specific situation and parties involved. This means that it’s crucial to work with experienced legal counsel when drafting or negotiating an intercreditor agreement to ensure that all parties’ interests are protected.
In conclusion, a sample intercreditor agreement is a legal document that can help multiple lenders protect their interests in the event of a borrower defaulting on their loans. This agreement outlines the order in which lenders will be repaid, sets provisions for communication and sharing of information, and may include a standstill clause to prevent harmful actions against the borrower. If you’re involved in a situation where an intercreditor agreement may be necessary, it’s important to work with experienced legal counsel to ensure that your interests are protected.