Q&As

In the context of intra-group loans, is a subordination deed only required to subordinate loans from non-obligor lenders to obligor debtors? Is there any reason obligor to obligor intra-group loans require subordination?

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Published on LexisPSL on 13/02/2019

The following Banking & Finance Q&A provides comprehensive and up to date legal information covering:

  • In the context of intra-group loans, is a subordination deed only required to subordinate loans from non-obligor lenders to obligor debtors? Is there any reason obligor to obligor intra-group loans require subordination?

The facilities agreement will often contain undertakings from the obligors that may provide sufficient protection against a potential competing debt claim from an obligor—this needs to be considered on a case by case basis. The guarantee wording in the loan market association standard form leveraged facilities agreement, for example, prevents an obligor from claiming or proving as a creditor in competition to a finance party. The document also obliges a creditor obligor to grant security over its rights as a creditor in favour of the finance parties. Therefore, it is not invariably be the case that a subordination deed is used in the context of loans between obligors.

Non-obligor group creditors will not, however, typically b

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