Intercreditor And Subordination Agreement Template for Canada

The Intercreditor and Subordination Agreement is essential in complex financing transactions where multiple creditors hold different levels of debt or security interests in the same borrower. This document is particularly crucial in Canadian financing arrangements where the interaction between federal and provincial laws requires careful consideration. It establishes the framework for how different classes of creditors will interact, particularly in scenarios involving defaults, enforcement actions, or insolvency proceedings. The agreement typically includes detailed provisions on payment priorities, standstill periods, enforcement rights, and security sharing arrangements, all while ensuring compliance with Canadian legal requirements including the Personal Property Security Act (PPSA) and the Bankruptcy and Insolvency Act. It's commonly used in leveraged finance transactions, project financing, and corporate restructurings where there are multiple tiers of debt.

1. Parties: Identification of all creditor parties, including senior creditors, subordinated creditors, and the debtor

2. Background: Context of the existing credit facilities, purpose of the agreement, and current security arrangements

3. Definitions and Interpretation: Definitions of key terms, including Senior Debt, Subordinated Debt, Enforcement Action, and interpretation rules

4. Subordination and Priorities: Core provisions establishing payment and security priorities between creditors

5. Payment Restrictions: Restrictions on payments to subordinated creditors, including permitted payments and payment blocks

6. Turnover Provisions: Obligations to turn over unauthorized payments or recoveries to senior creditors

7. Standstill Provisions: Restrictions on enforcement actions by subordinated creditors

8. Application of Proceeds: Order of application of proceeds from enforcement or insolvency

9. Security: Ranking and Enforcement: Provisions regarding the ranking of security interests and enforcement rights

10. Senior Creditor Rights: Rights of senior creditors to amend facilities and take enforcement action

11. Representations and Warranties: Basic representations from each party regarding authority and enforceability

12. Costs and Expenses: Provisions for payment of costs related to the agreement

13. Miscellaneous: Standard boilerplate provisions including notices, amendments, governing law

14. Governing Law and Jurisdiction: Specification of applicable law and jurisdiction for disputes