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Today, we`ll be discussing the IBA Draft Intercreditor Agreement and what it means for lenders and borrowers.
What is the IBA Draft Intercreditor Agreement?
The IBA (International Bar Association) Draft Intercreditor Agreement is a document that outlines the rights and obligations of multiple creditors when dealing with a single borrower. This agreement is typically used in situations where multiple lenders have provided financing to a borrower and want to establish a clear framework for how they will work together in the event of default or insolvency.
Why is it important?
The IBA Draft Intercreditor Agreement is important because it helps to establish a hierarchy of creditors and outlines the order in which they will be paid back in the event of default. This can potentially save time and legal fees by avoiding disputes between creditors.
In addition, having a clear framework for how multiple creditors will work together can provide lenders with increased confidence in the borrower`s ability to repay their debts. This can make it easier for borrowers to obtain financing and negotiate more favorable terms.
What are the key provisions of the IBA Draft Intercreditor Agreement?
The IBA Draft Intercreditor Agreement typically includes a number of key provisions, including:
1. Payment Waterfall: This outlines the order in which creditors will be paid back in the event of default.
2. Subordination: This refers to the fact that some creditors may be subordinated to others in terms of the priority of their claims.
3. Rights and Obligations of Creditors: This outlines the rights and obligations of each creditor, including their right to take enforcement action against the borrower in the event of default.
4. Standstill Agreements: These are agreements that typically prevent any creditor from taking enforcement action against the borrower for a certain period of time. This can provide the borrower with some breathing room to negotiate a workout plan.
5. Voting Rights: This refers to the voting rights of each creditor in relation to the borrower, including the right to approve any debt restructuring or workout plan.
Conclusion
The IBA Draft Intercreditor Agreement is an important document that can help to establish a clear framework for how multiple creditors will work together in the event of default or insolvency. As a professional, I encourage lenders and borrowers alike to familiarize themselves with this document in order to better understand their rights and obligations. By doing so, they can potentially save time and legal fees while also increasing their confidence in the borrower`s ability to repay their debts.
