If you`re a lender, you need to understand what an intercreditor agreement is and what its key terms are. An intercreditor agreement is a contract between two or more lenders that sets out the terms of their relationship in relation to a borrower. This agreement is important because it lays out the order in which each lender will be paid in the event of default.

Here are some key terms you should know when it comes to intercreditor agreements:

1. Seniority: This term refers to the order in which lenders will be paid in the event of default. Senior lenders have priority over junior lenders when it comes to payment. Senior lenders are typically first in line to be repaid, while junior lenders are last.

2. Subordination: Subordination refers to the agreement by junior lenders to accept a lower priority position in payment. This typically means that the junior lender agrees to be paid after all senior lenders have been paid.

3. Collateral: Collateral refers to the assets that a borrower has pledged as security for a loan. In an intercreditor agreement, the lenders will agree on how the collateral will be used in the event of default.

4. Standstill: A standstill provision is an agreement between lenders that they will not exercise their rights to take action against the borrower for a set period of time. This provision is often used to give the borrower time to restructure its debt.

5. Voting rights: Intercreditor agreements may specify the voting rights of each lender. This can be important in situations where the lenders need to make decisions that affect the borrower.

6. Default: The intercreditor agreement will set out what constitutes a default, including events such as failure to make payments, breach of covenants, and bankruptcy.

Understanding these key terms is essential if you`re a lender involved in an intercreditor agreement. By understanding the agreement, you can ensure that your interests are protected and that you are paid in the event of default. If you`re unsure about the terms of an agreement, it`s always a good idea to seek legal advice.