Glossary

Intercreditor Agreement

An agreement among two or more lenders holding claims against the same borrower or collateral — typically a senior mortgage lender and a mezzanine lender or B-note holder — establishing their relative payment priority, standstill obligations, and remedy rights.

Intercreditor agreements are essential wherever a capital stack includes more than one debt tranche secured by, or structurally linked to, the same underlying asset, since without a governing agreement, competing lenders could take conflicting or mutually destructive enforcement actions simultaneously. Key negotiated provisions typically include standstill periods restricting the subordinate lender's ability to accelerate or foreclose while the senior lender is pursuing its own remedies, notice and cure rights allowing the subordinate lender advance warning of a senior default with an opportunity to cure it, and buy-out or purchase options letting the subordinate lender acquire the senior debt at par (or at a negotiated price) to take control of the workout rather than being wiped out entirely. In a mezzanine debt structure specifically, the intercreditor agreement (often called a co-lender or recognition agreement in variations) also typically restricts the mezzanine lender's remedies to a UCC foreclosure on the pledged equity interests rather than a real property foreclosure, reflecting the structural distinction between mezzanine debt (secured by equity pledge) and mortgage debt (secured by the real property itself).