Intercreditor Agreement Mezzanine

From Mezzanine`s perspective, it is essential that payments be allowed to cover appropriate legal fees in order to enable mezzanine lenders to obtain independent legal advice and to protect their position in a default scenario. On the other hand, high-level lenders are generally concerned about the write-downs of mezzanine lenders, who will actually spend the money to prepare and defend the measures of priority lenders. Normally, a capped amount is agreed, but the size of that cap varies from agreement to agreement. But from the senior`s point of view, if mezzanine lenders get the additional stock guarantee, they risk imposing HoldCo`s shares and taking control of the company. This often results in a change of control in the preferred lenders` facility contract, which can then lead to a mandatory down payment – consequences that are rarely in the interest of either group of creditors. On this contentious issue, few intercreator agreements limit priority lenders that sell secured assets to a VPA held by priority lenders. A mezzanine lender may apply for the right to remedy defaults under priority debt in order to avoid the acceleration of priority debt, the collection of late interest and the application of the security of the priority lender, which is an event that could jeopardize the full repayment of the mezzanine debt. Normally, the healing rights of a mezzanine lender are limited to defaults and violations of financial pacts by injecting additional mezzanine debts (or perhaps equity). The incremental agreement is negotiated by the first mortgage lender and the mezzanine provider. The purpose of the interbank agreement is to outline the channels of communication and provide guidance between the first mortgage lender and the mezzanine investor.

More importantly, the agreement confers certain rights on the mezzanine financing provider in the event of a borrower`s default. The Intercreditor agreement will also specify when and what provisions of the loan file cannot be changed or amended without the consent of the opposing lender.

10. December 2020 by
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