Comparing Intercreditor Arrangements

The past several years have been marked by increased competition among banks and alternative lenders, each stretching to offer the most attractive financing terms and structures in order to win deal mandates from borrowers and private equity groups. To remain relevant in this competitive market, lenders have become more flexible on terms and adept at structuring transactions that include multiple tranches of debt and/or multiple liens. These transactions necessitate complex intercreditor arrangements among the lenders.

With multi-faceted intercreditor arrangements increasingly common in transactions today, and built-in flexibility in loan documents to accommodate additional debt and liens in a variety of structures on a self-executing, post-closing basis, it is critical for lenders to have a firm grasp of the considerations involved in intercreditor arrangements. The purpose of this article is to provide a comparison of the key aspects of several of the more common intercreditor arrangements, with a focus on the following types of structures: first lien/second lien, split collateral, senior/ mezzanine, and unitranche.

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