Documenting a Unitranche Facility and an AAL: A Practical Guide

Document type: Guide Practice area: Finance — Leveraged Finance Jurisdiction: United States Last reviewed: 5 September 2026

Stage 1 — Sequence the two documents together

The single most consequential process decision is to draft the credit agreement and the agreement among lenders in parallel, by teams that talk to each other.

Why this is not the default. The credit agreement is negotiated with the borrower and the sponsor on a deal timetable. The AAL is negotiated among lenders, often later, sometimes after closing, and frequently by different lawyers. The result is two documents using the same words differently.

The practical arrangement:

• One partner owns the consistency of both
• The AAL's first draft circulates before the credit agreement is final
• A single definitions reconciliation is run before signing (Stage 8)
• Where the AAL cannot be finished by closing, the lenders sign a binding term sheet covering the waterfall, the trigger, the voting construct, and the buyout option, with the long form to follow

What to resist. Closing on a credit agreement with an AAL "to be agreed." The lenders' relative positions are the deal, and negotiating them after the money is out removes everyone's leverage except the one holding the pen.

Stage 2 — Allocate the tranches and the skim

Decide the tranche sizes against the credit's risk profile: how much of the facility is genuinely low risk given the collateral and the enterprise value. A first-out tranche sized above the reliable collateral coverage is not a first-out tranche in substance.

Set the skim. Work from the blended rate the borrower will pay and the returns each tranche requires:

Blended rate × total = (First-out rate × first-out amount) + (Last-out rate × last-out amount)

Document the mechanic, and choose between:

• Direct application: the agent, as a party to the AAL, applies payments to give each tranche its own rate. Cleaner, and now the market norm.
• Pro rata with turnover: the agent applies payments pro rata under the credit agreement, and the first-out lenders remit the skim to the last out. Necessary where the agent will not join the AAL, and it introduces credit risk on the remitting lenders.

Address these, which are frequently missed:

• Fees. Upfront, commitment, and amendment fees — allocated pro rata, or per the skim, or negotiated separately.
• Prepayment premiums and make-wholes. Which tranche receives them, and in what proportion.
• Default interest. Whether it accrues to both tranches and how it is allocated.
• PIK interest, where any part of the last-out return accrues: where it sits in the waterfall and how it compounds.
• Original issue discount allocation.
• Delayed draw and incremental amounts: allocated between tranches at closing, or determined at draw, and whether either tranche may decline.

Stage 3 — Draft the trigger event

This definition decides when the last out stops earning its return, and it is the most valuable half-page in the document.

A workable formulation:

"Trigger Event" means: (a) any Insolvency Proceeding with respect to any Loan Party; (b) any acceleration of the Obligations; (c) any failure to pay principal or interest when due that continues for [five] Business Days; (d) the Total Net Leverage Ratio exceeding [__]:1.00 as of the last day of any two consecutive fiscal quarters; or (e) the commencement of any Enforcement Action.

Drafting points:

• Do not use "any Event of Default." A late compliance certificate would stop the skim, which is not what anyone intends.
• Give payment defaults a short grace, so an administrative failure does not trigger.
• The financial trigger should have headroom relative to the credit agreement covenant, and should require persistence — two consecutive quarters, not one.
• Consider a cure. Where the trigger is a leverage level, provide that the sequential waterfall reverts to ordinary course if leverage returns below the threshold for two consecutive quarters. Last-out lenders should press for this; first-out lenders resist it.
• Distinguish the trigger for the waterfall from the trigger for the buyout option. They need not be the same, and the buyout trigger should generally be broader — the last out wants the option available early.

Stage 4 — Draft the waterfall

Application of Proceeds. After the occurrence and during the continuance of a Trigger Event, all payments and proceeds shall be applied:

first, to the Agent's fees, costs, and expenses, including the costs of any Enforcement Action; second, to accrued and unpaid interest on the First Out Obligations; third, to the principal of the First Out Obligations, until paid in full in cash; fourth, to accrued and unpaid interest on the Last Out Obligations, including any PIK Interest; fifth, to the principal of the Last Out Obligations; sixth, to all other Obligations; and seventh, to the Borrower or as otherwise required by law.

Points to settle:

• "In cash" in the third clause matters — a first out paid in securities under a plan has not been paid in full for waterfall purposes unless the document says so.
• Post-trigger interest to the last out: does it accrue and rank in the fourth clause, or is it subordinated further? Usually it accrues and ranks where shown.
• Split waterfalls where a super-senior revolver holds priority over working capital collateral: define the collateral pools and apply separate waterfalls, with a provision for mixed proceeds.
• Application before a Trigger Event: state expressly that payments are applied per the credit agreement and the skim, so there is no ambiguity about the ordinary course.
• Enforcement proceeds versus ordinary payments: some agreements apply the sequential waterfall to enforcement proceeds at all times, and the ordinary waterfall to scheduled payments until a trigger.

Stage 5 — Build the voting construct

Three categories.

Ordinary amendments and waivers. Controlled by the required lenders under the credit agreement, computed across both tranches — so the larger tranche controls. State this expressly in the AAL rather than leaving it implicit.

Enforcement. The negotiated allocation. A workable construction:

The Controlling Party shall be the First Out Lenders, provided that if the First Out Lenders have not commenced an Enforcement Action within [120] days after a Trigger Event, the Last Out Lenders shall become the Controlling Party. During any Buyout Exercise Period, no Enforcement Action may be commenced or continued.

Sacred rights. Requiring the consent of each affected tranche, or each affected lender:

• Reduction of principal, interest, or fees applicable to that tranche
• Extension of that tranche's maturity or any scheduled payment date
• Any change to the Waterfall, the Skim, or the definition of Trigger Event
• Release of all or substantially all Collateral or Guarantees
• Any change to the sacred rights list, to the voting thresholds, or to the definition of Controlling Party
• Any increase in the other tranche
• Any change to the Buyout Option

The provision most often omitted is the last one. A last out whose buyout option can be amended by the required lenders — which the first out may control in a stressed credit — has no option.

Stage 6 — Draft the buyout option

Buyout Option. At any time after a Buyout Trigger, the Last Out Lenders may, by written notice to the First Out Lenders and the Agent, elect to purchase all (but not less than all) of the First Out Obligations at a price equal to 100% of the principal amount, plus accrued and unpaid interest, plus any prepayment premium or make-whole that would then be payable, plus any unreimbursed expenses, in each case in cash.

The purchase shall close within [15] Business Days of the notice.

From delivery of the notice until the earlier of the closing and the expiration of such period (the "Buyout Exercise Period"), no Enforcement Action shall be commenced or continued, and the First Out Lenders shall not accelerate, foreclose, or exercise any remedy.

The purchase shall be without recourse and without representation other than as to title, authority, and the amount outstanding.

Each Last Out Lender may participate pro rata; the shares of non-participating Last Out Lenders may be taken up by those participating.

The four provisions that make it work:

1. Enforcement suspension during the exercise period. Without it, the option is worthless when needed.
2. A short, certain closing period. Fifteen business days is standard; longer erodes the first out's position, shorter is not fundable.
3. A defined price, including whether prepayment premiums apply. Leaving this to be agreed guarantees a dispute.
4. A pro rata participation mechanism with a take-up right, so one reluctant last-out lender cannot block the exercise.

Also address: whether the option survives a bankruptcy filing (it should, and should be exercisable during a case); whether the first out may reject a defective notice; and whether there is a reciprocal option in the first out's favor.

Stage 7 — Turnover and bankruptcy provisions

These carry the enforceability risk, and the drafting should be layered.

Turnover. If any Lender receives any payment or distribution in respect of the Obligations in excess of the amount to which it is entitled under the Waterfall, whether in an Insolvency Proceeding or otherwise, such Lender shall hold the excess in trust for the Lenders entitled thereto, segregated from its other assets, and shall turn it over promptly, in the form received with any necessary endorsement.

Section 510(a). This Agreement is a subordination agreement within the meaning of Section 510(a) of the Bankruptcy Code, and the parties intend that it be enforceable in any Insolvency Proceeding to the same extent as under applicable non-bankruptcy law.

Separate Classes. The parties agree that the First Out Obligations and the Last Out Obligations shall be treated as separate classes of claims in any Insolvency Proceeding, and each Lender shall vote its claims only within its own tranche and shall support any plan that gives effect to the Waterfall, and shall not support any plan that does not.

Limitations. No Last Out Lender shall, in any Insolvency Proceeding: oppose any debtor-in-possession financing or use of cash collateral supported by the Controlling Party; seek adequate protection except as the Controlling Party seeks; or object to any sale supported by the Controlling Party — in each case for so long as the First Out Obligations remain outstanding.

Drafting notes:

• The turnover provision is the load-bearing one. It is a contract claim between non-debtors and requires nothing of the bankruptcy court. Draft it robustly: trust, segregation, prompt turnover, in the form received.
• The § 510(a) characterization costs nothing and may help.
• The separate classes and voting provisions may or may not be enforced. Include them; do not build the structure on them.
• The limitations on objections are of uncertain enforceability, since the Code confers standing on parties in interest — but courts enforcing intercreditor bargains have restricted contracted-away rights, and the provisions are standard.
• Preserve the buyout option expressly in an insolvency proceeding. It is the reliable remedy.

Stage 8 — The definitional reconciliation

Run this before signing. It is the last step and the most valuable.

Put the credit agreement and the AAL side by side and confirm that each of the following means the same thing in both, or that any difference is deliberate and documented:

The specific risk being managed. The credit agreement's Required Lenders may direct the agent to accelerate; the AAL may vest that decision in a tranche that is not a majority. Resolve it by defining Required Lenders in the credit agreement by reference to the AAL's Controlling Party, or by requiring directions to be delivered through the Controlling Party.

Also confirm: that the agent has joined the AAL for payment application purposes; that the credit agreement's assignment provisions require an AAL joinder; and that the pro rata sharing provisions in the credit agreement do not conflict with the skim.

Stage 9 — Administration and amendments

Payment application. The agent applies per the AAL. Confirm at closing that the agent's operations team has the waterfall and the skim in its system, not just in the file. Misapplied payments in the first quarter are common and create a turnover problem immediately.

Reporting. The lenders should agree what information circulates to whom, particularly where the first-out lender is a bank with a separate relationship with the borrower.

Amendments. A borrower request goes to the agent, which must determine the required consents under the credit agreement and any AAL consent required. Build a clear internal process, because the borrower experiences delay here and it damages the relationship.

Trigger monitoring. Someone must track whether a Trigger Event has occurred, because the waterfall and the skim change automatically when it does. Assign this, and confirm that the agent knows.

Transfers. Every assignment requires an AAL joinder. Confirm the agent will not register a transfer without one, and that the transferor remains liable if it does.

The super-senior revolver layer

Most unitranche financings include a working capital facility, and it sits above the unitranche rather than inside it. That adds a third document and a set of decisions.

Why it is separate. The unitranche provider is a fund; funds do not want to hold revolving commitments, which require funding capacity, letter of credit issuance, and daily administration. A bank provides the revolver, and it will not sit behind the unitranche on working capital collateral.

The structure. A separate credit agreement for the revolver, a separate lien or a shared lien with priorities set by intercreditor, and an intercreditor agreement between the revolver lender and the unitranche agent.

The collateral split. Typically:

• Revolver priority collateral: accounts, inventory, deposit accounts, related general intangibles, and proceeds
• Unitranche priority collateral: everything else — equipment, real estate, intellectual property, equity of subsidiaries, and proceeds

Or a super-priority cap approach, where the revolver has first priority on all collateral up to a stated dollar cap, and the unitranche has priority above it. Simpler, and common in smaller deals.

The provisions that matter:

• The cap. If the revolver's priority is capped, the cap must accommodate the commitment plus accrued interest, fees, protective advances, and hedging — otherwise the revolver lender's real exposure exceeds its priority.
• Access rights, if the revolver lender needs to realize inventory from premises the unitranche lender controls.
• Standstill, and who may enforce first.
• Consent to debtor-in-possession financing and cash collateral, which the revolver lender will want the unitranche lender to give in advance.
• Amendments: what each may agree with the borrower without the other, particularly commitment increases.
• Purchase option, so each may buy out the other at par.

The documentation reality. There are now three interlocking documents — the unitranche credit agreement, the AAL, and the intercreditor — plus the revolver credit agreement. The definitional reconciliation must cover all of them, and the terms most likely to diverge are Enforcement Action, Insolvency Proceeding, Obligations, and the assignment and joinder requirements.

A structuring alternative. Where the parties want to avoid the third document, the revolver can be included in the unitranche credit agreement as the first-out tranche, with the AAL governing its priority. This is elegant and is used, and its limitation is that a bank providing a revolver inside a fund's credit agreement is accepting the fund's covenant package and its administrative arrangements, which banks often resist.

A worked sequence: documenting the Kelsterbach facility

The deal. $185 million unitranche supporting a sponsor acquisition, with a $25 million super-senior asset-based revolver from a separate bank.

Week 1. The lead fund and the first-out bank agree a term sheet covering tranche sizes ($60 million first out, $125 million last out), the skim, the trigger, control, and the buyout option. This precedes the credit agreement's first draft, which is the right order.

Week 2–5. Credit agreement negotiated with the sponsor. In parallel, the AAL first draft circulates among the lenders.

Week 4, a definitional problem surfaces. The credit agreement defines Required Lenders as holders of more than 50% of the loans; the AAL gives enforcement control to the first out, which holds 32%. The agent's counsel flags that it could receive an acceleration direction from the required lenders that the AAL says only the first out may give.

The fix: the credit agreement's Required Lenders definition is amended to provide that any direction to accelerate or exercise remedies must be delivered by the Controlling Party as defined in the AAL, and the agent is entitled to rely on the Controlling Party's certification.

Week 5, the trigger negotiation. The first out proposes a trigger on "any Event of Default." The last out counters with bankruptcy, acceleration, payment default after five business days, and leverage above 6.75x for two quarters — with a reversion if leverage returns below 6.25x for two quarters. The reversion is the last out's win, and the first out concedes it in exchange for a shorter standstill (90 days rather than 150).

Week 6, the buyout option. Agreed at par plus accrued plus any applicable prepayment premium, on 10 business days' notice with a 15-business-day close, with enforcement suspended throughout. The first out asks for a make-whole; the last out refuses; they settle on the prepayment premium schedule in the credit agreement.

Week 6, the super-senior revolver. Documented as a separate facility with a conventional intercreditor between the revolver lender and the unitranche agent, allocating working capital collateral to the revolver on a super-senior basis. Three documents now, and the definitional reconciliation must cover all three.

Week 7, reconciliation. One associate runs the table across the credit agreement, the AAL, and the intercreditor. It finds three inconsistencies: "Enforcement Action" defined differently in the AAL and the intercreditor; "Insolvency Proceeding" omitting foreign proceedings in one document; and the assignment provisions requiring an AAL joinder but not an intercreditor joinder. All three are fixed in a day, and any one of them would have been a serious problem in a workout.

Week 8. Closing. The agent's operations team is walked through the waterfall and the skim, and confirms both are configured.

Month 4. The first interest payment is misapplied — the agent's system applied pro rata rather than per the skim. It is caught in the lenders' first quarterly reconciliation and corrected. This is routine and is the reason for the quarterly reconciliation.

Exercising the buyout option: a working procedure

The option is the structure's principal remedy, and exercising it under time pressure requires preparation that should be done in advance.

Before any trigger — the standing preparation:

• Model the buyout price at several points in the facility's life, including any prepayment premium. A last-out lender that does not know what the option costs cannot decide quickly.
• Confirm the funding source. A fund exercising a $60 million option needs the capital available in fifteen business days, which for some vehicles requires a capital call with its own notice period. Check the fund documents before the option is needed.
• Pre-draft the notice. A one-page document should not take three days to produce during a crisis.
• Confirm the mechanics with the agent — how the transfer will be registered, what the agent requires, and how long its process takes.

On a trigger:

1. Confirm the Buyout Trigger has occurred and document it. The first out will scrutinize a notice delivered on a defective trigger.
2. Compute the price: principal, accrued interest to the anticipated closing date, prepayment premium if applicable, and unreimbursed expenses. Request a payoff computation from the first out and reconcile it.
3. Poll the last-out lenders on participation, and apply the take-up mechanism for non-participants.
4. Deliver the notice in the manner the AAL specifies, to the persons it specifies, with proof.
5. Confirm in writing that the Buyout Exercise Period has commenced and that enforcement is suspended. Do this immediately; it is the provision the first out is most likely to test.
6. Close within the period. An assignment agreement, payment in immediately available funds, and registration by the agent.
7. Notify the borrower and the other parties, and confirm the new lender composition.

What goes wrong:

• The trigger is contested. The first out argues the leverage computation was wrong or the payment default was cured. Have the computation ready.
• The price is disputed, usually over the prepayment premium. This is why the AAL should state expressly whether it applies.
• Funding is slow. The most common failure, and entirely preventable.
• The first out accelerates during the exercise period, arguing the suspension does not apply. Draft the suspension broadly and confirm it in writing on delivery of the notice.
• A last-out lender declines to participate and there is no take-up mechanism. Draft one.

A tactical note. The credible threat of exercise is often enough. A first out that knows the last out has the capital and has modeled the price behaves differently from one that suspects it cannot fund. Telling the first out, early and calmly, that the option has been modeled and the capital is available is frequently the whole negotiation.

Advising the borrower

Borrower's counsel is not at the table for the AAL, which does not mean there is nothing to do.

Ask the questions that can be answered.

• Who is the agent, and which lenders hold which tranche?
• Who controls enforcement, and who controls amendments and waivers?
• Is there a buyout option, and on what trigger?
• Is there a trigger event that changes the lenders' internal arrangements, and is it tied to a financial ratio in our credit agreement?

Lenders will answer some of these even where they will not produce the document, and each answer changes how the borrower should behave. A borrower whose leverage covenant is set at 6.5x and whose lenders' trigger event is at 6.75x should know that crossing 6.5x is a covenant problem and crossing 6.75x is a lender-relationship problem of a different kind.

Negotiate what you can in the credit agreement:

• A response covenant: the agent will respond to a waiver or consent request within a stated period, or will confirm what consents are required and when they are expected. Soft, but it establishes an expectation.
• Transfer restrictions: consent rights over assignments to competitors and disqualified institutions, and — worth asking — notice of any transfer that changes tranche composition.
• Agent replacement rights on defined triggers.
• Clarity on prepayment application: if the borrower prepays to reduce cost, understanding how the payment is applied between tranches determines whether the blended rate falls.
• Amendment fee allocation, so a borrower paying to amend is not paying twice.

Set expectations internally. A borrower's finance team should understand that in a stressed credit, its agent may not be able to answer questions quickly, and that this reflects an internal lender process rather than bad faith. Two months of ambiguity is the borrower's principal cost of the structure, and warning the client about it at closing is better than explaining it during a workout.

The one thing worth pushing hard for. Ask to see the AAL, or a summary of the waterfall, the voting construct, and the buyout option. Most lenders decline. Some, particularly where the borrower has alternatives, provide a summary. A borrower that knows who controls enforcement is materially better positioned than one that does not, and the request costs nothing.

Errors that recur

Sequencing.

• Closing the credit agreement with the AAL "to be agreed." The lenders' relative positions are the deal; negotiating them after funding removes everyone's leverage but one party's.
• Drafting the two documents by teams that do not talk to each other.

Definitions.

• Required Lenders in the credit agreement inconsistent with Controlling Party in the AAL, so the agent can receive a direction the AAL forbids.
• Enforcement Action, Insolvency Proceeding, and Obligations defined differently across the credit agreement, the AAL, and any intercreditor.
• Trigger Event defined as "any Event of Default," so a late compliance certificate stops the skim.

Economics.

• Failing to allocate fees, prepayment premiums, default interest, PIK accruals, and original issue discount between tranches.
• Not addressing how delayed draw and incremental amounts are allocated.
• The agent's operations team never configured with the waterfall and the skim, so the first payments are misapplied.

Control.

• No suspension of enforcement during the buyout exercise period, which makes the option worthless.
• The buyout option amendable by the required lenders, which the first out may control in a stressed credit.
• A standstill measured from a date that is hard to establish.
• No take-up mechanism, so one reluctant last-out lender blocks an exercise.

Bankruptcy.

• Relying on classification and voting provisions rather than on turnover.
• A turnover provision without trust, segregation, and in-the-form-received language.
• Failing to preserve the buyout option expressly in an insolvency proceeding.

Transfers.

• Assignment provisions that do not require an AAL joinder, so a transferee is not bound.
• No provision keeping the transferor liable where a joinder is not obtained.

Administration.

• Nobody assigned to monitor whether a Trigger Event has occurred, so the waterfall does not change when it should.
• No quarterly reconciliation of payment application, so misapplications compound.

A documentation timetable

The two entries that determine whether this works are week −1's term sheet, which puts the lender negotiation ahead of the borrower negotiation, and week 7's reconciliation, which catches the defects that would otherwise surface in a workout three years later.

Quick reference

Draft the two documents together. One partner owns consistency. The AAL circulates before the credit agreement is final.

The skim is the deal between the lenders. Allocate fees, premiums, default interest, PIK, and delayed draw explicitly.

The Trigger Event decides when the last out stops earning. Never "any Event of Default." Give payment defaults a grace period, give financial triggers headroom and persistence, and negotiate a reversion.

The waterfall is sequential after a trigger: expenses, first-out interest, first-out principal in cash, last-out interest including PIK, last-out principal, other obligations, borrower.

Control goes to the last out on ordinary matters and to the first out on enforcement subject to a standstill — with sacred rights protecting each tranche's economics, the waterfall, releases of substantially all collateral, and the buyout option itself.

The buyout option is the structure's real remedy. Par plus accrued plus any premium, short notice, short close, enforcement suspended throughout, pro rata participation with a take-up right.

Turnover carries the bankruptcy risk. Trust, segregation, in the form received. The classification and voting provisions are useful; do not build on them.

Reconcile the definitions before signing. Required Lenders, Event of Default, Trigger Event, Enforcement Action, Insolvency Proceeding, Obligations, and the joinder requirements — across every document.

When the credit deteriorates

The AAL's provisions become operative in a predictable sequence, and counsel to either tranche should know where in the sequence the credit sits.

First: the covenant. The borrower breaches its financial covenant under the credit agreement. This is a lender-borrower event and is handled through the ordinary amendment process, controlled by whichever tranche holds the majority. The other tranche's consent is not required unless a sacred right is implicated — and note that a covenant reset that changes the leverage levels may implicate the AAL's Trigger Event definition if that definition cross-references the covenant.

Second: the Trigger Event. The waterfall turns sequential and the skim stops. This happens automatically, on the terms of the AAL, whether or not anyone notices. Someone must be watching, because the agent will continue applying payments as configured until told otherwise, and misapplied payments after a trigger create turnover claims.

Third: control shifts. If the AAL gives enforcement control to the first out on a trigger, it now has it, and its incentives differ from the last out's. The first out wants a prompt realization sufficient to repay it; the last out wants time and value.

Fourth: the standstill runs. During it, the tranche without control cannot act. This is the period in which the buyout option should be evaluated and, if it is going to be exercised, exercised.

Fifth: the option or the enforcement. Either the last out buys out the first out, or the first out enforces. The first outcome is far more common because it is better for both — the first out is repaid at par, which is what it wanted, and the last out gets control.

Sixth: if neither happens, a filing. At which point the tranches are one class of claims under a contract whose bankruptcy effect is not fully settled, the remedy is a turnover claim, and everyone's costs increase substantially.

The practical instruction for both tranches. Evaluate the buyout at stage two, not stage five. A last-out lender that models the option when the trigger occurs — rather than when the first out serves an enforcement notice — has time to arrange funding and to negotiate. The structure gives the last out a clean exit from a bad situation, and it is available for exactly as long as the last out is paying attention.

Cross-border unitranche

European and cross-border unitranche facilities have developed their own conventions, and counsel working across jurisdictions should note the differences.

Terminology. The European market often speaks of "super senior" revolving facilities and "senior secured" term debt rather than first out and last out, and documents the relationship in an intercreditor agreement modeled on the standard forms rather than in an agreement among lenders. The economic result is similar; the documentation conventions differ.

Security structure. Multi-jurisdictional facilities require local law security in each relevant jurisdiction, held by a security agent or, in civil law jurisdictions, through a parallel debt structure — because those systems do not recognize a trustee holding security for a fluctuating class of lenders. The parallel debt provision creates an independent obligation to the security agent equal to the aggregate obligations, secured by the local security.

Enforcement. European intercreditor conventions give the super senior creditors enforcement instruction rights only after a standstill, with the senior secured creditors controlling first — the reverse of the common US allocation. Do not assume the US pattern.

Distressed disposals. European intercreditor agreements contain detailed provisions permitting the security agent, on an enforcement sale meeting specified conditions, to release claims and security of junior creditors — the mechanism that makes a credit bid or a sale to a lender group workable outside an insolvency process.

Insolvency regimes. The enforceability question that troubles the US structure has different answers elsewhere. Schemes of arrangement and restructuring plans in some jurisdictions permit cross-class cram down on terms that make intercreditor arrangements more, not less, effective.

Practical advice. Where a facility spans jurisdictions, decide early which system's conventions will govern the creditor arrangements, and resist blending them. A US-style AAL bolted onto a European security structure, or a European intercreditor governing US-law tranches, produces documents whose interaction nobody has thought through — and the interaction becomes relevant exactly when the credit is worst.

Related documents

• Unitranche facilities and agreements among lenders: one loan, two tranches, and a private waterfall
• Unitranche and AAL review checklist
• Unitranche toolkit: AAL provisions, waterfall mechanics, and voting constructs
• Closing and administering a syndicated credit facility: a practical guide
• Executing or resisting a liability management transaction: a practical guide