Commentary

54 Springing subordination

BANKING vol 4(1)
| Commentary

54 Springing subordination

| Commentary

54 Springing subordination

Conceptually a springing subordination is the opposite to a complete subordination in that initially there is no subordination, and payments on all debt and equity investment can be made in accordance with their respective provisions but that on the occurrence of a contingency (which may never happen) the subordination provisions come into effect. Thus the senior lender may be prepared for interest and principal repayments to be paid on mezzanine debt and dividends to be paid on equity investment from the beginning but that if certain identified events occur then the subordination provisions would spring into effect

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