Different types of transactions have different typical structures and types of debt, and there are also significant differences within each type of transaction. This practice note contains provisions that are often found in most inter-secretary agreements. There are often different levels and types of agreements that participate in leveraged financing. Interconnection documents are used to give legal effect to the level of real risk existing in any type of agreement. Simply put, the order of priority of these funding tranches is in ascending order of risk: provides an explanation of the main provisions of an interconnection agreement, including: As with the inter-credit agreement between priority debt and subordinated debt, the payment of a return on equity is subject to certain payment conditions. These are generally stricter than those that apply to debts incurred and include: The LMA form of the intercreditor agreement gives mezzanine lenders (as well as sponsors) a right of healing by bringing in new money in equity to remedy a breach, for example.B a breach of a financial obligation in the priority debt. Under the terms of intercreditor agreements, it is relatively common for mezzanine lenders to want to force priority lenders to sell their debt at face value (“withdraw the elderly”). However, the issue remains controversial (especially for a debtor), as it would give mezzanine lenders control of the enforcement process and could consider a different strategy than priority creditors. However, there are very few cases where such a right has actually been exercised by mezzanine lenders in a difficult context, with mezzanine lenders often having the option of buying back priority lenders on the secondary market (and sometimes below face value).
In order to avoid circumstances where the sale price is high enough for mezzanine debt to be fully amortized, there is now a step in including standard requirements in intercredit agreements, so that sale revenues must be retained in cash (since it is not uncommon to see intercreditor agreements allowing a securities agent to accept an unsustainable consideration) and to set a fair value of market (by which: Requirement of independent evaluations and a B. correct marketing process). .