52 Areas of application

BANKING vol 4(1)
| Commentary

52 Areas of application

| Commentary

52 Areas of application

Subordination arrangements are generally required where debt is provided by more than one class of creditor. Subordination arrangements can apply where the debt owed to various creditors is secured or unsecured and whether the debt arises:

  1. 52.1

        in the ordinary course of business of the debtor;

  2. 52.2

        as part of general borrowing requirements;

  3. 52.3

        as an integral part of a rescue package; or

  4. 52.4

        as an element of a specific financing package, such as is involved in a management buy-out or buy-in.

Generally, the provider of the largest part of the credit (typically a clearing bank) will

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