European Intercreditor Agreements: What You Need to Know

When it comes to financing large-scale projects, multiple creditors are often involved. These creditors may include banks, private equity firms, and other financial institutions. In order to ensure that each creditor is properly protected, intercreditor agreements are necessary. These agreements outline the respective rights and obligations of each creditor, as well as the priority of payments in the event of default.

In Europe, intercreditor agreements have become increasingly important due to the proliferation of complex financial structures. These structures often involve multiple layers of debt, with senior and junior debt holders having varying degrees of priority in the event of default. In order to properly navigate these structures, it is important to have a clear understanding of European intercreditor agreements.

One key feature of European intercreditor agreements is the subordination of junior debt. In the event of default, senior debt holders are generally entitled to priority payment, while junior debt holders may not receive payment until the senior debt has been satisfied. This hierarchy is typically outlined in the intercreditor agreement, and may involve various levels of subordination.

Another important aspect of European intercreditor agreements is the allocation of voting rights. In some cases, senior creditors may have the right to vote on certain aspects of the project, such as major expenditures or changes to the underlying collateral. Junior creditors may have less say in these matters, but may still have certain voting rights outlined in the agreement.

It is also common for European intercreditor agreements to include provisions for sharing collateral. This may involve the creation of a shared security pool, in which all creditors have a stake. Alternatively, individual creditors may be entitled to specific assets in the event of default, based on the priority of their debt.

Overall, European intercreditor agreements are essential for managing the risks associated with complex financial structures. By outlining the respective rights and obligations of each creditor, these agreements help to ensure a smooth and equitable resolution in the event of default. If you are involved in financing large-scale projects in Europe, it is important to work with experienced legal and financial advisors to navigate the intricacies of intercreditor agreements.