Do I need an intercreditor arrangement?

An intercreditor arrangement should be put in place in any situation where two or more creditors of the same person or entity wish to vary or confirm the position at law as regards creditor issues. These may include:

1. •

   in what order the creditors should be repaid on insolvency

2. •

   in what order the creditors should be repaid out of enforcement of security proceeds

3. •

   any restrictions on repayments or payments to a creditor prior to insolvency

4. •

   any restrictions on a creditor enforcing its security or pursuing a debt claim against the entity, and

5. •

   any restrictions on a creditor making additional debt available to that entity

On insolvency, without a contractual intercreditor arrangement in place, secured creditors will, subject to certain exceptions for floating charges, rank ahead of unsecured creditors, who will rank pari passu (subject to priority debts). As between themselves, the order of repayment of the secured creditors will depend on rules relating to the priority of security