A junior lender should apply for exemption from a certain class of collateral that a priority lender has not included in its asset base. Once it has been agreed that there will be a personal guarantee from the borrower`s client or a guarantee to the junior lender, the junior lender should ensure that the agreed rights are properly reflected in the interbank agreement and do not stop. Junior lenders should be careful when evaluating an intercredit file before participating. One way to achieve this goal is to negotiate a fair edge and develop achievable plans. However, if efforts to set such conditions are unsuccessful, it is advisable that the junior lender waive the agreement or seek other options. The mezzanine lender will want to ensure that there is certainty as to when these payments will be resumed (for example. B if the event that causes them has been corrected or cancelled? or should the priority lender take positive steps and to what extent is this discretion?). The mezzanine lender will also want to ensure that, due to the restrictions imposed by the primary lender, the borrower group is not relieved of debt service liability and that it is clear what happens to previously limited payments (for example. Are they capitalized? or are they paid when the restriction expires?). Ince Gordon Dadds is active for priority lenders, mezzanine lenders and borrowers and has experience in advising inter-secretary agreements in all deal sizes.
Given their respective pledge priorities, the chances of a second pledge creditor recovering common guarantees can be significantly reduced if the obligations of the first pledgeee are increased. To avoid this “cram down”, subordinate creditors generally try to explicitly limit the nature and amount of priority commitments that can be guaranteed by the first pledge of common guarantees whose terms are strongly negotiated. A second pawnbroker may attempt to exclude items such as the initial outstanding issue discount, the portion of the incremental late rate, as well as certain commissions and expenses. In addition, the second pawnbroker generally targets a dollar cap on the total amount of capital of the first mortgage commitments. Hedging obligations, which are a priority obligation, can vary considerably and increase the dollar ceiling. In the case of cross-border transactions or the locking of the guarantee in different countries, currency exchanges and fluctuations should be covered by the interbank agreement. Incremental credit facilities, such as refinancing or increasing credit extensions (e.g. B accordion facilities, basic loans and debt loans (DIP) in the context of bankruptcy may also be subject to the overall ceiling. Similarly, interest and expenses, expenses, allowances and other expenses may be subject to a different cap or placed in the same basket.