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Intercreditor Agreement for the United Kingdom

Intercreditor Agreement Template for England and Wales

An Intercreditor Agreement under English and Welsh law is a complex contractual arrangement that establishes the relationship between different classes of creditors, setting out their respective rights, priorities, and obligations in relation to their claims against a common debtor. It regulates payment priorities, enforcement rights, and the timing and manner of taking action against the debtor, particularly in default scenarios. The agreement is fundamental in structured finance transactions and is governed by English law principles of contract and equity.

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Intercreditor Agreement

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What is a Intercreditor Agreement?

An Intercreditor Agreement is essential in transactions involving multiple lenders or debt providers. It is commonly used in leveraged finance, project finance, and restructuring scenarios where different classes of debt exist. The agreement establishes a clear hierarchy of claims, regulates the exercise of creditors' rights, and provides mechanisms for managing competing interests. Under English and Welsh law, Intercreditor Agreements are particularly valued for their flexibility and the jurisdiction's well-established legal framework for complex financial arrangements. The document typically includes detailed provisions on payment waterfalls, enforcement standstills, and security sharing arrangements.

What sections should be included in a Intercreditor Agreement?

1. Parties: Identifies all parties to the agreement including senior creditors, junior creditors, security trustee, and borrower

2. Background: Sets out the context of the financing arrangements and purpose of the agreement

3. Definitions and Interpretation: Defines key terms and interpretation principles

4. Ranking and Priorities: Establishes the ranking of debt and security

5. Payment Provisions: Details payment waterfall and turnover obligations

6. Security Enforcement: Sets out rights and restrictions on enforcement of security

7. Insolvency: Addresses rights and obligations in insolvency scenarios

What sections are optional to include in a Intercreditor Agreement?

1. Purchase Options: Rights of junior creditors to purchase senior debt - include when parties want to include buy-out rights

2. Hedging Liabilities: Provisions relating to hedge counterparties - include when hedging arrangements are part of the financing structure

3. New Debt: Provisions for additional debt incurrence - include when future additional debt is contemplated

What schedules should be included in a Intercreditor Agreement?

1. Form of Accession Deed: Template for new parties joining the agreement

2. Form of Resignation Letter: Template for parties leaving the agreement

3. Security Documents: List of security documents subject to the agreement

4. Notice Details: Contact details for all parties

5. Creditor Groups: Detailed breakdown of creditor classifications and holdings

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Document Type

Security Agreement

Cost

Free to use
Relevant legal definitions














































Clauses




































Industries

Companies Act 2006: Primary legislation governing corporate matters, including security registration requirements and corporate authority for entering into intercreditor arrangements

Insolvency Act 1986: Key legislation dealing with creditor priorities, insolvency proceedings, and the treatment of different classes of creditors in insolvency scenarios

Enterprise Act 2002: Legislation containing important provisions affecting security enforcement and administration procedures

Law of Property Act 1925: Fundamental legislation governing real property security and enforcement of security rights over real estate

Financial Services and Markets Act 2000: Principal legislation regulating financial services in the UK, including requirements for regulated entities entering into intercreditor arrangements

Financial Collateral Arrangements (No.2) Regulations 2003: Regulations governing financial collateral arrangements and their enforcement, particularly relevant for security over financial assets

Banking Act 2009: Legislation establishing special resolution regime for banks and specific provisions regarding bank insolvency procedures

Land Registration Act 2002: Legislation governing the registration of security interests over real property and priority rules

Retained EU Law: Post-Brexit incorporated EU legislation, including retained provisions of the EU Regulation on Insolvency Proceedings

Common Law Principles: Established legal principles including equitable priorities, contractual interpretation, and the doctrine of subordination

Pari Passu Principle: Common law principle regarding equal treatment of creditors of the same class in insolvency

FCA Regulations: Financial Conduct Authority regulations affecting regulated entities participating in intercreditor arrangements

PRA Requirements: Prudential Regulation Authority requirements affecting regulated entities, particularly banks and insurance companies

Bank of England Guidance: Relevant guidance from the central bank affecting intercreditor arrangements involving regulated financial institutions

Teams

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