Flip clause definition

View the related practice notes about Flip clause

Intercreditor payment priorities and requisite majorities

BackgroundThe aim of the intercreditor agreement (also known as a deed of priority) is to try and deal with potential conflicts which will inevitably arise between the different classes of secured lender on a restructuring.Waterfall of paymentsThe intercreditor agreement usually sets out a payment waterfall directing the security trustee how to apply any money received by it (whether sale proceeds, proceeds of litigation or payments from a debtor wrongly paid to a junior creditor and handed over under turnover provisions) either (i) in all circumstances or (ii) during normal operations (pre-enforcement) and post enforcement ie a 'flip' clause (see below). The payment waterfall will generally provide for the security trustee's fees to be paid out first, and then money paid to creditors according to their ranking (usually secured lenders appearing at the top of the list) with any surplus being returned to the debtors. A typical payment waterfall may require the security trustee to apply monies received towards:•first—sums owing to the security trustee•second—enforcement costs and expenses incurred by any senior...

English law v New York law governed ISDA documents

English and New York law are the two most commonly selected governing laws for the International Swaps and Derivatives Association (ISDA) documentation, particularly where counterparties from different jurisdictions are looking to agree a governing law which is mutually acceptable. The ‘Cross Border Multi-Currency ISDA Master Agreement’ is designed to be fully enforceable under either choice of governing law. This has been achieved not only through careful drafting but also through the influence of ISDA itself in lobbying national legislators to introduce legislation which supports the cross border market in financial transactions documented under its standard terms.As such, within the ISDA Master Agreement, Schedule and accompanying documents there will appear to be little variation, outside of the additional terms agreed in Part 5 of the ISDA Master Agreement, which are discussed below. The major differences between English law and New York law documents are shaped more by factors external to the ISDA documents, such as local law and regulatory requirements, particularly in relation to insolvency laws. Of the two jurisdictions, English...