Structuring Intercreditor Agreements in Split Collateral Lien Structures Between ABL and Term Lenders

Middle-market leveraged finance arrangements often contain multiple tranches of debt. Negotiating related intercreditor agreements has become more dynamic, and second lien lenders and junior lenders are increasingly able to obtain more favorable terms.

ABLs and term lenders often join to provide such multi-tranche financing through a split collateral lien structure. In that structure, the ABL lender receives a first lien on the working capital assets—typically receivables, inventory and related proceeds—and the term lender receives a first lien on the remaining assets. Each lender also gets a junior lien on the other lender’s pool of collateral.

Listen as our authoritative panel of commercial finance practitioners analyzes critical provisions in a split collateral intercreditor agreement from the perspectives of both the ABL and the term lender. The panel will discuss essential provisions, including among others, the priority of rights, access to collateral, payment blockage and standstill provisions.

1. Defining collateral pools
2. Priority of rights issues
3. Access to collateral
4. Payment blockage
5. Standstill and the senior lienholder’s right to exercise remedies
6. Waterfall provisions

The panel will review these and other high priority issues:

• Defining and delineating the collateral pools of the lenders
• Understanding priority rights to proceeds from collateral or other receipts not allocated to either lender
• Identifying and negotiating each lender’s rights and remedies following a borrower default