Intercreditor agreement

An intercreditor agreement is a more detailed form of priority arrangement, typically used where a senior construction lender and a mezzanine or preferred equity provider both hold positions in the same project, setting out not just ranking but detailed rules on drawdowns, cure rights, standstill periods and what each party can and cannot do if the other declares a default. It is more elaborate than a straightforward deed of priority because the ongoing relationship between senior and mezzanine capital, drawing down over the life of a construction project, needs rules for day-to-day interaction, not just an enforcement waterfall. For a developer, the intercreditor agreement is negotiated primarily between the senior lender and the mezzanine or preferred equity provider, though its terms materially shape how flexible the overall facility feels once construction is underway. Delays in agreeing intercreditor terms are a common reason mezzanine-funded projects take longer to reach financial close than a single-lender facility.

Related

Mezzanine & preferred equity · Mezzanine finance · Deed of priority