Glossary
Intercreditor deed
An intercreditor deed governs the relationship between senior and subordinated lenders on the same project, usually a development. It covers ranking, payment order, consent rights, standstill periods and when the junior lender may step in or enforce.
An example
A developer funds a project with senior construction debt and a mezzanine facility. The two lenders negotiate an intercreditor deed that stops the mezzanine lender enforcing for a period while the senior lender decides how to respond to a default.
Why it matters
The intercreditor deed decides what happens when a project runs into trouble, which can matter more to the developer than the headline pricing. It can restrict refinancing, variations and distributions. Borrowers should have it reviewed by a lawyer before financial close.
Points to check
If more than one funder is involved, read the intercreditor deed as closely as the loan agreements. Check the order of payments, any standstill period that stops the junior lender acting, and when the junior lender can step in or buy out the senior. Ask how the deed deals with extensions and variations, because a change agreed by one lender may need the other's consent.
Read about mezzanine finance