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.