The LSTA Form Intercreditor Agreement: A Comprehensive Guide

The LSTA Form Intercreditor Agreement is a document that outlines the terms of a loan between two or more lenders. It is used when there are several creditors involved in a financing transaction, and it helps to govern the relationships between all parties. In this article, we will explore what the LSTA Form Intercreditor Agreement is, how it works, and why it is important.

What is the LSTA Form Intercreditor Agreement?

The LSTA Form Intercreditor Agreement is a standardized document that is used in financing transactions with multiple creditors. It was developed by the Loan Syndications and Trading Association (LSTA) and is widely used in the industry. The purpose of the agreement is to define the relationships between the lenders, as well as their priorities and rights in the event of default or bankruptcy.

How does the LSTA Form Intercreditor Agreement work?

The LSTA Form Intercreditor Agreement is a complex document that can be customized to meet the needs of each transaction. Generally, it outlines the following key terms:

– The priority of debt: The agreement specifies the order in which the creditors will be paid if the borrower defaults. This is important because it determines the risk exposure of each lender.

– Voting rights: The agreement also defines how decisions will be made among the lenders, including who has the right to vote on key issues.

– Enforcement: In the event of a borrower default, the agreement outlines how the lenders will work together to enforce their rights and recover their loans.

– Bankruptcy: The agreement also addresses how the lenders will be treated in the event of the borrower`s bankruptcy, including how the proceeds of any sale will be distributed among the creditors.

Why is the LSTA Form Intercreditor Agreement important?

The LSTA Form Intercreditor Agreement is an important document because it helps to ensure that all parties are on the same page in a financing transaction. By defining the relationships between the lenders, it helps to minimize disputes and ensure that everyone is working together toward a common goal. This is particularly important in complex transactions with multiple creditors, where there may be competing interests.

Moreover, the LSTA Form Intercreditor Agreement is widely recognized in the industry, which makes it easier for lenders to work with each other on multiple transactions. By using a standardized document, lenders can avoid the need to negotiate the terms of each deal from scratch, which can save time and money.

Conclusion

The LSTA Form Intercreditor Agreement is a vital document in financing transactions with multiple creditors. By defining the relationships between the lenders, it helps to minimize disputes and ensure that everyone is working together toward a common goal. Moreover, it is widely recognized in the industry, which makes it easier for lenders to work with each other on multiple transactions. If you are involved in a financing transaction with multiple creditors, it is important to work with an experienced legal team to draft an agreement that meets your needs.