Otterbourg Attorneys Present Webinar on Intercreditor Agreements
September 26, 2019
Otterbourg attorneys David Morse and Michael Barocas, members of the Otterbourg finance practice group, conducted a Strafford live webinar titled "Drafting Standstills in Intercreditor Agreements: Balancing Rights and Remedies of Junior and Senior Lienholders" on Thursday, September 26, 2019.
One of the key points of negotiation in an intercreditor agreement is the scope of the "standstill" or "remedies block." The provisions prohibit a lender with a junior security interest from exercising its rights and remedies against the collateral while the lender with a senior security interest has the exclusive right to determine the exercise of rights and remedies against the collateral. In the context of a lien subordination, the standstill period generally focuses on restricting the junior lienholder's actions against the collateral.
At the same time, an intercreditor agreement that only deals with lien subordination often expressly allows a junior lienholder to file a proof of claim, take steps to preserve their lien, vote on a plan of reorganization, and other actions, even during the standstill period. Ultimately, the rights of the junior lienholder will be heavily dependent on the language of the intercreditor agreement.
The webinar covered critical issues involved in drafting and negotiating standstill provisions of intercreditor agreements from the perspective of both senior and junior lienholders. Topics addressed included, among others, the scope, nature, duration and commencement of the standstill, post-termination of the standstill, notice to senior lienholder, and reinstatement or reset of the standstill period.