Provided for download is an overview of the key terms and provisions in intercreditor/subordination agreements governing the relationship between a senior secured lender (the Senior Lender) and a mezzanine lender (the Mezz Lender). Typically, the obligations owing to the Mezz Lender (the Mezz Obligations) are unsecured or are secured solely by a pledge of the equity interests in the borrower and/or by a second lien security interest on the Senior Lender’s collateral (which when coupled with the payment subordination applicable to the Mezz Obligations, is frequently referred to as a “silent” second lien).
The applicability and negotiation surrounding each of the following discussed points can vary significantly based on the deal structure and the industry-specific experience and business relationships of the parties involved:
- Payment Subordination and Blockage
- Lien Subordination – Silent Second Lien and Equity Pledge
- Exercise of Remedies/Standstill
- Subordinate Lender-Favorable Provisions – Cure Right and Purchase Right
- Debt Caps, Amendments and Other Restrictions
- Customary Bankruptcy Provisions
Download Stuck in the Middle of the Cap Stack: Intercreditor and Subordination Agreements in Mezzanine Financings to better understand this layer of the capital stack.