How to Draft a Intercreditor Agreement (2026 Template and Clauses)

An intercreditor agreement is a contract between the lenders to the same borrower (and usually the borrower itself) that sets the rules between those lenders: who ranks where, who gets paid first, who can enforce security and when, and how proceeds are shared. It is the rulebook for a group of creditors, used whenever a company borrows from more than one source. This guide explains what it governs, the clauses that matter, and gives a clause-by-clause skeleton. It is written for finance teams, founders raising layered debt and anyone sitting across a multi-lender deal. It is general guidance, not legal advice, and most real intercreditor agreements start from a market form such as the Loan Market Association template, which you negotiate against. ## What an intercreditor agreement does When a borrower has senior lenders, mezzanine lenders, shareholder loans and perhaps hedging counterparties, each of them has claims over the same company and often the same assets. Left to the general law, enforcement would be a race. An intercreditor agreement replaces the race with agreed rules, so the deal holds together and senior lenders know their position is protected. It typically covers: - Ranking of each class of debt and security.

• Payment permissions, what each class can be paid and when.
• Enforcement control, who can enforce shared security and on whose instruction.
• The waterfall, the order in which enforcement proceeds are applied.
• Standstill, how long junior creditors must wait before acting. It is broader than a two-party subordination agreement because it coordinates several classes of creditor at once. ## The classes of creditor it ranks A typical structure ranks, from top to bottom: super-senior claims (often hedging and sometimes a revolving facility), senior secured debt, second-lien or mezzanine debt, and then structurally subordinated items such as shareholder or intra-group loans. The agreement defines each class and fixes its place. ## The core structure of an intercreditor agreement ### 1. Parties and recitals Name the agent or security agent, each class of creditor (or its representative), and the debtors. Recitals identify the facilities and the purpose: to regulate ranking and enforcement. ### 2. Definitions Define each debt class, the secured obligations, the security, enforcement action, the discharge date for the senior debt, permitted payments and distressed disposal. Definitions do most of the heavy lifting. ### 3. Ranking and priority State the ranking of debts and of security, expressed to apply regardless of the date security was created or registered, and regardless of how the general law would rank them. ### 4. Permitted payments Set out what each junior class may be paid while senior debt is outstanding, for example scheduled interest, and when those payments stop, usually on a default or a payment blockage notice with a defined duration and frequency cap. ### 5. Turnover If any creditor receives something it was not entitled to, including enforcement proceeds out of order, it holds the amount on trust and turns it over to those who rank ahead. ### 6. Enforcement and standstill Set out who controls enforcement of shared security, normally the senior creditors or the security agent on their instruction, and the standstill periods junior classes must observe before they can take their own action. Include the limited cases where a junior can act earlier, such as an insolvency. ### 7. Security agent and the waterfall Appoint the security agent, set out its duties and protections, and state the order in which enforcement proceeds are applied: costs and the agent first, then super-senior, senior, junior, and finally the debtors. The waterfall is central and should be unambiguous. ### 8. Distressed disposals and release Give the security agent power, on an enforcement, to sell the charged assets or shares and to release security and junior claims so a clean sale can happen, with protections on how value is tested (for example a sale at fair value or by a competitive process). ### 9. Option to purchase and equity cure Often junior creditors get an option to buy out the senior debt at par before a distressed disposal, and sponsors may get a cure right. Include if the deal provides for them. ### 10. Amendments, consents and voting Set out whose consent is needed to change the finance documents, which decisions are reserved, and how classes vote. ### 11. Duration and boilerplate The agreement runs until the senior obligations are discharged. Add notices, governing law, jurisdiction and counterparts. ## A usable intercreditor skeleton ```

1. Parties and recitals
2. Definitions (each debt class, security, discharge date, permitted payments)
3. Ranking and priority (debt and security)
4. Permitted payments and blockage
5. Turnover on trust
6. Enforcement control and standstill
7. Security agent duties and the proceeds waterfall
8. Distressed disposals and release of security and claims
9. Option to purchase and cure rights
10. Amendments, consents and voting
11. Duration, notices, governing law, counterparts

- **Standstill with no exceptions.** Junior creditors need defined relief for insolvency and for senior inaction; a block with no outlet will not be agreed.
- **Weak release mechanics.** If the security agent cannot cleanly release junior claims on a sale, a distressed disposal stalls. Build the release power and its value tests properly.
- **Mismatch with the facilities.** Defined terms and permitted payments must match the senior and junior facility agreements exactly.
- **Forgetting hedging and intra-group debt.** Rank them explicitly rather than leaving their position to argument. ## Drafting, reviewing and tracking an intercreditor deal in one place An intercreditor agreement is the hub of a financing: it points to the senior facility, the mezzanine facility, the hedging documents, the security and the shareholder loans, and its terms must line up with all of them. Its triggers, blockage notices, standstill periods and the senior discharge date, are events people have to track across the life of the loan. Keeping the draft, the clause-level review and those events in one workspace keeps the hub and its spokes consistent. [Adira](https://adiralaw.com) is one such workspace, built on frontier AI, where you can draft from a brief, see each ranking, standstill and waterfall clause marked favourable, neutral or unfavourable to your position, link the intercreditor agreement to the facility and security files it governs, and track blockage and discharge dates as alerts. The rulebook and the documents it rules over stay aligned. Get the ranking, the enforcement control and the waterfall right, and the rest of an intercreditor agreement follows.