The Differences Between Lien And Debt Subordination
Law360, New York ( June 14, 2016, 2:47 PM EDT) -- The necessity for an intercreditor agreement depends on the types of financing involved. At the outset of discussions, counsel should identify whether the parties intend (1) "debt subordination," where the debt owing to one creditor is subordinated in right of payment to the other creditor or (2) "lien subordination," where each of the creditors is secured and an intercreditor agreement sets forth the relative priority of the liens of each creditor on the assets of the borrower. While for both debt subordination and lien subordination an intercreditor agreement is used, since the agreement in both cases is between creditors, it is common to refer to an agreement providing for debt subordination as a subordination agreement and an agreement providing for lien subordination as an intercreditor agreement....
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