Acquisition finance—intercreditor agreement—parties and structures
Acquisition finance—intercreditor agreement—parties and structures

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Acquisition finance—intercreditor agreement—parties and structures
  • Senior creditors
  • Agents
  • Junior secured creditors
  • High yield noteholders
  • Unsecured creditors
  • Typical creditor combinations

Any transaction that involves more than one class of creditor will typically need an intercreditor agreement to be put in place. The arrival of different kinds of financing structures and types of debt, including bank/bond structures and unitranche facilities, has given rise to a greater variety of intercreditor arrangements. This note aims to give a basic introduction to the common creditor classes in leveraged finance transactions and explain their key rights and controls under a typical leveraged intercreditor agreement.

The Loan Market Association (LMA) intercreditor agreements are often used as a starting point for documenting intercreditor arrangements in leveraged finance transactions. The LMA had developed intercreditor agreements for:

  1. leveraged finance transactions involving senior and mezzanine debt

  2. leveraged finance transactions involving a super senior revolving facility and senior secured notes

  3. leveraged finance transactions involving a super senior revolving facility and both senior secured and high yield notes, and

  4. leveraged finance transactions involving a super senior revolving facility and term debt (ie for use on unitranche transactions)

For an overview of the purpose of the intercreditor agreement, a more general explanation of the parties involved and for a detailed discussion of key provisions, see Practice Note: Intercreditor agreement—key provisions.

Senior creditors

Senior lenders and senior debt

Senior lenders are the banks and other financial institutions that have made facilities available under the senior facilities