An equalisation intercreditor agreement is a legal document that outlines the terms and conditions between two or more creditors who have lent money to the same borrower. The agreement is designed to ensure that all creditors receive equal treatment in terms of repayment and priority of claims.
The main purpose of an equalisation intercreditor agreement is to avoid any confusion or disputes that may arise between creditors when dealing with a borrower who has multiple loans or credit facilities. By agreeing to a set of terms and conditions, all creditors are able to work together to ensure that they are treated fairly and that their respective interests are protected.
One of the key provisions of an equalisation intercreditor agreement is the priority of claims clause. This clause sets out the order in which creditors will be repaid in the event of a default by the borrower. Generally, senior creditors are given priority over junior creditors, with the most senior creditor being the first in line to receive repayment.
Another important provision in an equalisation intercreditor agreement is the sharing of collateral. This clause outlines how the collateral pledged by the borrower will be shared between the various creditors. In some cases, the collateral may be divided equally among all creditors, while in others, the collateral may be divided based on each creditor`s share of the total debt.
The equalisation intercreditor agreement also sets out the terms and conditions for any waivers or amendments to the original loan agreements. This ensures that any changes to the terms of the loan or credit facility are made with the consent of all the creditors, and that no one creditor is able to unilaterally change the terms of the loan.
In conclusion, an equalisation intercreditor agreement is a critical legal document that helps to ensure that all creditors are treated equally and fairly in their dealings with a borrower who has multiple loans or credit facilities. By agreeing to a set of terms and conditions, all creditors are able to work together to protect their respective interests and avoid any confusion or disputes that may arise. As such, it is important for all parties involved in these types of transactions to carefully consider the terms of the agreement and ensure that they fully understand their rights and obligations.