Intercreditor, Subordination and Priority Agreements in Finance: Drafting, Negotiation and LMA Precedents for Senior and Junior Creditors
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Practice notes
Intercreditor arrangements—initial considerations
Do I need an intercreditor arrangement?
An intercreditor arrangement ought to be established whenever two or more creditors of the same person or entity want to amend or confirm the position at law concerning creditor issues. Typical matters addressed include:
- the sequence in which creditors are to be repaid on an insolvency
- the sequence for payments from the proceeds realised through enforcement of security
- any limits on repayments or other payments to a creditor before insolvency
- any limits on a creditor enforcing its security or pursuing a debt claim against the entity, and
- any limits on a creditor making additional debt available to that entity
Where no contractual intercreditor arrangement exists, on insolvency secured creditors, subject to certain exceptions for floating charges, rank ahead of unsecured creditors, who rank pari passu (subject to priority debts). As between themselves, the order of repayment of secured creditors will depend on rules relating to security priority and insolvency law. There are numerous situations in which parties will wish to vary the legal position. Absent such terms, unsecured creditors share equally, while secured creditors follow priority rules on any insolvency. A straightforward example is where a shareholder in a company undertakes...
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Web page updated on 21/05/2026
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