Syndicated Credit Facilities and Intercreditor Arrangements: Agents, Lenders, and Priority

Document type: Article Practice area: Corporate — Finance Jurisdiction: United States (federal and New York) Last reviewed: 5 September 2026

One contract, many counterparties, no fiduciary

A bilateral loan is a relationship. A syndicated facility is an institution — a single credit agreement binding a borrower and a group of lenders whose interests diverge from the moment the deal closes, held together by an agent whose job description is defined mostly by what it is not.

The agent is not a fiduciary, and the agreement says so at length. The administrative agent maintains the register, receives and distributes payments, delivers notices, calculates interest, holds the collateral for the benefit of the secured parties, and takes direction from the required lenders. It disclaims any duty to investigate the borrower's condition, any duty to disclose what it knows in its other capacities, and any fiduciary relationship with the lenders. These disclaimers are not boilerplate; they are the consideration for a bank agreeing to be the agent at all.

Why it matters for a lender. A lender that relied on the agent to monitor the credit has relied on someone who owes it nothing. Each lender represents in the agreement that it made its own credit decision and will continue to do so.

And why it matters for the borrower. The agent is the borrower's counterparty for administration and its channel to the syndicate — and the agent cannot deliver a consent it does not have the votes for. A borrower that manages only the agent relationship discovers at the moment it needs an amendment that it has no relationship with the lenders who will decide.

The voting architecture

Required Lenders. Ordinarily lenders holding more than fifty percent of the aggregate commitments and outstanding loans, with defeaulting lenders and, usually, borrower affiliates disenfranchised. Required Lenders can waive defaults, amend most covenants, direct the agent, and accelerate.

Sacred rights. A defined set of amendments requiring the consent of each affected lender, because they go to the economics an individual lender bought:

Reduction in principal, interest rate, or fees
Extension of any scheduled payment date or maturity
Increase in a lender's commitment
Changes to the pro rata sharing provisions and the waterfall
Release of all or substantially all of the collateral or the guarantors
Changes to the definition of Required Lenders or to the sacred rights provision itself

Everything turns on how those categories are drafted, and the last two have become the central battleground of modern credit agreements. A release of "all or substantially all" of the collateral requires unanimity; a release of eighty percent of the collateral to a newly formed unrestricted subsidiary might not.

Class voting. Multi-tranche facilities give each class a vote on amendments affecting it disproportionately. The definition of "disproportionate" is negotiated and, when it matters, litigated.

Amend-and-extend and open-market repurchases. Modern agreements permit a subset of lenders to extend maturity without unanimity, and permit the borrower to buy back its own loans on a non-pro-rata basis subject to conditions. Both are useful, and both create the possibility of a majority acting against a minority.

Assignments, participations, and who actually holds the loan

Assignment transfers the loan itself. The assignee becomes a lender of record, with voting rights, direct claims against the borrower, and a place in the register. Assignment ordinarily requires the consent of the agent and — except during a payment or bankruptcy event of default — the borrower, with consent deemed given if not refused within a stated period.

Participation transfers economic exposure only. The participant has a contract with the selling lender, not with the borrower. It has no vote except on sacred rights it is contractually granted, no direct claim, and credit exposure to the seller as well as the borrower.

The register is what matters legally. The agent maintains it; entries in it are conclusive; and a transfer not recorded is not effective as to the borrower and the agent.

Disqualified institution lists. Borrowers negotiate the right to name competitors and their affiliates, and distressed debt funds, as institutions to whom loans may not be assigned. The list is only as good as its maintenance and its affiliate definition, and borrowers routinely discover that the fund they excluded holds the paper through an affiliate that was not on the list.

Why the distinction between assignment and participation is worth care. In a restructuring, the entity with the vote is the lender of record. A participant with all the economic exposure and none of the votes is dependent on a seller whose remaining interest may be minimal.

Are syndicated loans securities? No — and the reasoning matters

If syndicated term loans were securities, the entire market would sit inside the federal securities laws: disclosure obligations, antifraud liability, and a very different set of practices for the information banks share with lenders.

They are not. Kirschner v. JPMorgan Chase Bank, N.A., 79 F.4th 290 (2d Cir. 2023) applied the family resemblance test of Reves v. Ernst & Young, 494 U.S. 56 (1990) to a large syndicated term loan facility and concluded that the notes were not securities. The court weighed the four Reves factors: the motivations of the parties (a commercial loan for corporate purposes, not an investment); the plan of distribution (limited to sophisticated institutional entities under an agreement with assignment restrictions, not general trading); the reasonable expectations of the investing public (participants were told the instruments were loans); and the existence of another regulatory scheme reducing the risk (bank regulatory guidance on leveraged lending).

The lineage is longer than one case. Banco Español de Crédito v. Security Pacific National Bank, 973 F.2d 51 (2d Cir. 1992) reached the same conclusion for loan participations, and Marine Bank v. Weaver, 455 U.S. 551 (1982) illustrates the broader principle that an instrument within the literal words of the statutory definition at 15 U.S.C. § 77b or 15 U.S.C. § 78c is not necessarily a security when the context supplies other protections.

The practical consequences of the answer.

For lenders: no federal securities antifraud claim against the arranger for the information memorandum. Claims sound in contract, negligent misrepresentation where available, and common law fraud — all harder.

For arrangers: the information memorandum is a contractual document, not a prospectus, and the extensive disclaimers in it do real work.

For everyone: the market's discipline comes from documentation and from institutional practice, not from a disclosure regime. Which is exactly why the documentation is where all the value is.

The covenant package

Financial covenants. A maintenance covenant is tested every quarter regardless of activity — a leverage ratio, an interest coverage ratio, a fixed charge coverage ratio. An incurrence covenant is tested only when the borrower does something: incurs debt, makes a restricted payment, makes an investment.

Covenant-lite means no maintenance financial covenant on the term loan, or a springing covenant on the revolver only, tested when revolver utilization exceeds a threshold. The consequence is that a deteriorating credit does not trip a covenant until it misses a payment — by which time the enterprise has often lost the value the covenant was meant to protect. Lenders traded early warning for yield, and the bill arrives in restructurings.

Negative covenants are where the real drafting happens.

Indebtedness. A general prohibition with a long list of baskets: capital leases, purchase money, acquired debt, general basket sized in dollars and as a percentage of EBITDA, ratio debt permitted if a leverage test is met pro forma, and — critically — incremental facilities.

Liens. Mirrors the debt covenant, and must be read against it. A basket permitting debt without a corresponding lien basket permits only unsecured debt.

Restricted payments. Dividends, distributions, and buybacks. A builder basket accumulating a percentage of consolidated net income, plus fixed baskets, plus ratio-based capacity.

Investments. Including — and this is where trouble concentrates — investments in unrestricted subsidiaries.

Asset sales. With mandatory prepayment from proceeds, subject to reinvestment rights.

Restricted and unrestricted subsidiaries. Restricted subsidiaries are subject to the covenants and typically guarantee the debt. Unrestricted subsidiaries are outside the credit group entirely — not bound by the covenants, not guarantors, and their assets not collateral. The ability to designate a subsidiary as unrestricted, and to transfer assets to it under the investment covenant, is the mechanism behind an entire category of transactions discussed below.

Incremental facilities and the free-and-clear basket. Modern agreements permit the borrower to add term loans or revolving commitments without new consent, in an amount equal to a fixed "free and clear" dollar amount (often expressed as a multiple of EBITDA) plus unlimited amounts subject to a pro forma leverage test. The MFN provision — requiring the existing loans to be repriced if the incremental is priced more than a stated margin above them — is usually subject to a sunset after six or twelve months.

EBITDA definitions. The single most negotiated definition in leveraged finance. Add-backs for non-recurring items, restructuring charges, and run-rate cost savings and synergies, sometimes uncapped and projected over a long look-forward period. A leverage ratio is only as meaningful as its denominator, and an EBITDA definition with uncapped synergy add-backs makes ratio-based capacity nearly unlimited.

Intercreditor agreements

Where more than one class of secured debt shares collateral, the intercreditor agreement allocates control. It is a contract among creditors, and the borrower is usually a party only for acknowledgment.

Lien priority. First lien and second lien on the same collateral, or split collateral where one class has a first lien on receivables and inventory (the ABL priority collateral) and the other has a first lien on everything else (the term priority collateral). Split-collateral structures are common and their intercreditor agreements are correspondingly detailed about which collateral is which and what happens to proceeds.

The standstill. The junior class agrees not to exercise remedies against shared collateral for a stated period — commonly ninety to one hundred eighty days — after notice of default, during which the senior class may act. The standstill is the heart of the agreement and its exceptions are heavily negotiated: does it apply in bankruptcy; does it permit the junior class to file a proof of claim, to vote on a plan, to object to a sale?

Waivers by the junior class. Typically: no objection to a sale under 11 U.S.C. § 363 supported by the senior class; no objection to debtor-in-possession financing or cash collateral use consented to by the senior class, up to a cap; no adequate protection claims inconsistent with the senior class's; and no challenge to the senior liens after a stated investigation period.

Purchase option. The junior class may buy out the senior debt at par plus accrued, typically within a short window after acceleration. It is rarely exercised and it is real leverage.

Release provisions. If the senior class releases its lien on collateral in a sale, the junior lien is automatically released as well — the provision that makes a senior-directed sale possible.

Credit bidding. The right of a secured creditor to bid its debt rather than cash at a sale of its collateral. RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639 (2012) held that a plan proposing to sell collateral free of liens cannot be confirmed over the secured creditor's objection under the "fair and equitable" standard of 11 U.S.C. § 1129 unless the creditor may credit bid — closing a route debtors had used to strip a lender of its collateral at a cash auction. Intercreditor agreements allocate the credit bid right, and a junior class that waived it has waived a great deal.

Subordination is enforceable in bankruptcy. 11 U.S.C. § 510(a) provides that a subordination agreement is enforceable in a bankruptcy case to the same extent it is enforceable under applicable non-bankruptcy law. This is what gives intercreditor agreements their teeth — the priority survives the filing, which is precisely when it matters.

Liability management: the covenants are now a lender-versus-lender document

The most consequential development in leveraged finance over the last decade is that borrowers and their sponsors learned to use covenant flexibility to move value among lenders rather than away from them. The transactions have names.

Drop-down (the "trap door"). The borrower designates a subsidiary as unrestricted, transfers valuable assets to it using capacity under the investment and asset sale covenants, and the unrestricted subsidiary — outside the credit group, unencumbered by the existing liens — raises new debt secured by those assets. The existing lenders' collateral has left the building, entirely within the four corners of their agreement.

The defense, in drafting: limit or eliminate the ability to designate unrestricted subsidiaries; prohibit transfers of material intellectual property and other specified assets to unrestricted subsidiaries regardless of basket capacity; require that any transfer of assets used in the business be for fair value in cash; and add a blocker preventing the use of investment capacity to move collateral out of the credit group.

Uptier (the "priming" transaction). A majority of lenders agree with the borrower to amend the credit agreement to permit new super-priority debt, then exchange their own loans into that new tranche — leaving the non-participating minority subordinated in a facility they can no longer control. Because the amendment permitting new priority debt is typically a Required Lender amendment rather than a sacred right, a bare majority can do it.

The defense, in drafting: make any subordination of liens or claims a sacred right requiring each affected lender's consent; require pro rata participation in any exchange or new money opportunity; make the pro rata sharing provision unamendable without unanimity; and require open-market purchase mechanics for any repurchase.

Double-dip and pari-plus structures are variations on the same theme, generating a claim against the borrower and against a guarantor or collateral pool in ways the original documents did not contemplate.

Litigation has produced no single settled rule. Courts have looked closely at whether the transaction fit the literal terms of the agreement, whether the "open market purchase" language was satisfied, and whether the implied covenant of good faith constrains a majority exercising an express contractual right. The results have varied with the documents and the facts, which is the point: these are contract cases, and the contract is the whole game.

The market response. Cooperation agreements among lenders — binding a group to act together and not to participate in a non-pro-rata transaction — have become standard defensive infrastructure, negotiated after the credit agreement rather than in it.

The bond overlay: the Trust Indenture Act contrast

Where a capital structure includes bonds, a different rule applies to amendments touching payment.

Section 316(b) of the Trust Indenture Act, 15 U.S.C. § 77ppp(b), provides that the right of a holder to receive payment of principal and interest on or after the due date, and to institute suit for enforcement, may not be impaired or affected without that holder's consent.

Marblegate Asset Management, LLC v. Education Management Finance Corp., 846 F.3d 1 (2d Cir. 2017) construed that provision narrowly, holding that it prohibits only amendments to the core payment terms — not out-of-court restructurings that leave the payment terms formally intact while rendering the notes practically worthless. The practical effect is that a foreclosure and asset transfer leaving a hollow obligor does not violate § 316(b) even though the holder's recovery is destroyed.

And indenture interpretation is a matter of contract construction. Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691 F.2d 1039 (2d Cir. 1982) is the classic statement that boilerplate indenture provisions are construed uniformly, as a matter of law, without reference to the particular parties' intent — because uniform construction is what makes the instruments tradeable.

The takeaway for a capital structure with both loans and bonds: the loan side has sacred rights defined by contract; the bond side has a narrow statutory protection plus whatever the indenture provides. Neither prevents value from being moved by a transaction that respects the literal terms.

Worked example: the Ketteridge Holdings recapitalization

Ketteridge Holdings makes specialty coatings. Sponsor-owned since a leveraged buyout four years ago. Capital structure: a four-hundred-million first lien term loan (covenant-lite, held by roughly forty institutional lenders), a seventy-five-million asset-based revolver secured by receivables and inventory on a first-lien basis, and a one-hundred-fifty-million second lien term loan.

The problem. EBITDA has fallen from ninety-five million to fifty-two. There is no maintenance covenant to trip, so nothing has happened contractually. The revolver's springing covenant has not sprung because the sponsor has kept utilization below the threshold by funding working capital with equity. Every document is being complied with while the credit deteriorates, which is the covenant-lite structure working exactly as designed for the borrower.

What the sponsor's counsel finds in the credit agreement.

An unrestricted subsidiary designation right, subject only to a leverage test at the time of designation and to available investment basket capacity.

An investment basket consisting of a fixed dollar amount plus a builder basket that has accumulated meaningfully because EBITDA add-backs for synergies kept consolidated net income positive on paper.

No express prohibition on transferring intellectual property to an unrestricted subsidiary.

Amendment provisions making the incurrence of new priority debt a Required Lender matter, and making the pro rata sharing provision a sacred right — but not the subordination of liens.

The two transactions on the table.

A drop-down. Designate Ketteridge Coatings IP LLC as unrestricted, contribute the coating formulations and trademarks using investment capacity, and raise one hundred million secured by those assets at the unrestricted subsidiary. The existing lenders lose their lien on the company's most valuable assets, and the new money sits ahead of them with respect to those assets.

An uptier. Assemble a group holding fifty-one percent of the first lien term loan; amend the agreement to permit super-priority debt; have the participating group exchange its loans into the new super-priority tranche at a discount to par while providing new money; leave the remaining forty-nine percent in a subordinated position. The pro rata sharing sacred right is a problem — unless the transaction is structured as an open-market purchase, which the agreement permits on a non-pro-rata basis.

What the minority lenders do about it. Adaora Whitfield, a portfolio manager holding sixty million of the first lien and unwilling to be on the wrong side of either transaction, does three things in one week.

She reads the agreement herself, not the summary. She finds that the unrestricted subsidiary designation requires a leverage test and computes, using the agreement's own EBITDA definition and stripping the synergy add-backs she believes are unsupportable, that the test may not be met. This is a factual dispute worth having.

She organizes. She contacts holders of another thirty-one percent of the first lien and they sign a cooperation agreement: none will participate in any non-pro-rata transaction, none will transfer without binding the transferee, and they will act together. Together they hold forty-two percent — not a blocking majority for Required Lender amendments, but enough that no fifty-one percent group can be assembled without them.

She writes to the agent reserving rights and asserting that any designation of an unrestricted subsidiary holding material intellectual property would be a transfer of "substantially all" of the collateral requiring unanimous consent under the sacred rights provision.

The negotiated outcome. The sponsor gets its new money — one hundred million of super-priority financing — but on a pro rata basis open to all first lien lenders, with the second lien lenders' consent obtained through an amendment to the intercreditor agreement in exchange for an extended standstill and a fee. The intellectual property stays in the credit group. The maturity is extended eighteen months, and a maintenance leverage covenant is added — which the lenders wanted more than the fee.

Why it went this way. Not because the documents prohibited the aggressive transactions. Because forty-two percent of the first lien organized before the transaction rather than after it. Adaora's cooperation agreement was worth more than any covenant in the credit agreement, and it took eight days to assemble.

Syndication mechanics: how the loan gets sold

The credit agreement is the destination; syndication is the road.

The commitment letter. The arranger commits to provide the full facility, then sells it down. The commitment is conditioned on a limited set of items — the "SunGard" or certain funds conditions — designed to give an acquisition borrower confidence that financing will be there at closing. The market flex provision is the arranger's protection: the right to change pricing, structure, and terms within stated limits if the facility cannot be syndicated at the agreed terms. Borrowers negotiate the size of the flex, whether it can move structure as well as price, and whether it is exhausted once used.

The fee letter. Arrangement, underwriting, ticking, and agency fees, plus the flex terms. Kept separate from the commitment letter for confidentiality, and cross-conditioned.

The information memorandum. Prepared with the borrower, containing the business description, financial information, projections, and the terms. Delivered under a confidentiality undertaking. Two versions are prepared: a "private" version containing material non-public information, and a "public" version scrubbed of MNPI for lenders whose personnel trade in the borrower's securities. Managing the public–private divide is a real compliance function on both sides.

The bank meeting and the book. Lenders indicate interest; the arranger allocates. Oversubscription permits tightening; undersubscription triggers the flex.

Ratings. For rated facilities, the process runs in parallel and the outcome affects pricing and the investor base.

Closing and allocation. Commitments are documented, the register is opened, and the loans fund. The syndicate that exists at closing is not the syndicate that will exist in a restructuring — the paper trades, sometimes heavily, and a borrower that assumes it is dealing with its relationship banks two years later is usually wrong.

Why a borrower should care about all of this. The identity of the eventual holders is determined by the assignment provisions and the disqualified institution list, both negotiated at signing. A borrower that wants to control who holds its debt has one opportunity, and it is before closing.

Defaults, remedies, and the workout posture

Events of default run to a familiar list: payment; covenant breach with or without grace; representation breach; cross-default or cross-acceleration to other debt above a threshold; bankruptcy; judgment above a threshold; ERISA events; change of control; and invalidity of the guarantees or liens.

Cross-default versus cross-acceleration. Cross-default trips on the other lender's default; cross-acceleration trips only when the other lender actually accelerates. Borrowers should insist on cross-acceleration, because a technical default under an unrelated agreement should not put the whole capital structure in default.

Equity cure rights. Sponsor-backed deals permit the sponsor to contribute equity, counted as EBITDA, to cure a financial covenant breach — limited in frequency (no more than a stated number of times over the life, not in consecutive quarters) and sometimes in whether the cure amount reduces debt for ratio purposes. The cure right is valuable to the sponsor and a real erosion of the covenant's warning function.

On default, the practical sequence. The agent notifies; the borrower and sponsor request a waiver or amendment; the required lenders decide, usually for a fee and a tightening; and if no deal is reached, the required lenders may direct acceleration and enforcement. Acceleration is rare — it crystallizes losses and usually forces a filing — and the threat of it is what produces the amendment.

In a workout. Forbearance agreements with milestones. Amendments trading covenant relief for fees, additional reporting, an interest rate increase, amortization, or additional collateral. Restructuring support agreements binding a majority to a plan. The lender group's cohesion is the single variable that most determines the outcome, which is why organizing early matters more than any individual provision.

Where the leverage actually is

For the borrower and sponsor, leverage is in the flexibility negotiated at signing: unrestricted subsidiary designation, investment and restricted payment baskets, incremental capacity, EBITDA add-backs, and the absence of a maintenance covenant. These are won in a hot market and used in a cold one. A sponsor that negotiated hard on baskets four years ago has options its counterpart does not.

For a majority lender group, leverage is in the Required Lender threshold and in the fact that most amendments sit below the sacred rights line. Fifty-one percent can do a great deal.

For a minority lender, leverage is in three places: the sacred rights list, if it was drafted well; the ability to assemble a blocking position quickly; and the credible threat of litigation over whether a transaction fits the agreement's terms. The first is fixed at signing; the second and third are exercised in days, not weeks.

For the agent, there is no leverage and no discretion worth having — which is the design. The agent acts on Required Lender direction and is indemnified for doing so.

For a second lien lender, leverage is almost entirely in the intercreditor agreement: the length of the standstill, the scope of the waivers, the purchase option, and whether the credit bid right survived. A second lien lender who did not read the intercreditor agreement before buying has bought an option it does not understand.

Reading a credit agreement for risk: the order that works

One: the definitions of EBITDA, Consolidated Net Income, and Available Amount. Everything ratio-based flows from these. Look for uncapped synergy add-backs, long look-forward periods, and whether pro forma adjustments require any third-party support.

Two: Required Lenders and the sacred rights list. Is subordination of liens or claims a sacred right? Is pro rata sharing unamendable? Is the release of collateral defined by reference to "all or substantially all," and if so, all or substantially all of what?

Three: the unrestricted subsidiary machinery. May the borrower designate? On what conditions? What may be transferred, and is intellectual property carved out? Is there a blocker on investments in unrestricted subsidiaries that hold material assets?

Four: the investment, restricted payment, debt, and lien baskets — read together. Capacity is cumulative and reclassifiable; a borrower can often combine several baskets to do something no single basket permits.

Five: incremental capacity. The free-and-clear amount, the ratio-based amount, the MFN protection and its sunset, and whether incremental debt may be secured on a superior basis.

Six: assignment provisions. Consent rights, the disqualified institution list and its affiliate definition, and whether the borrower or its affiliates may hold loans.

Seven: the intercreditor agreement. Standstill length and its exceptions, bankruptcy waivers, release provisions, purchase option, and credit bid allocation.

Eight: the guarantee and collateral package. Which subsidiaries guarantee; which assets are excluded; whether foreign subsidiaries are pledged and to what extent; and the release conditions.

A useful discipline: read items two, three, and four as an adversary — assume a sponsor's counsel is trying to move value out, and ask what stops them. If the answer is "nothing explicit," you have found the risk.

The public–private information problem

A syndicated loan sits in an unusual place: the lenders receive material non-public information about a borrower whose securities many of them also trade.

The structure that manages it. Borrowers deliver information through a platform with two sides. Private-side lenders receive projections, budgets, and management commentary — material non-public information. Public-side lenders receive only information the borrower has marked as suitable for persons who trade in its securities. Institutions maintain internal walls, and personnel elect a side.

Why it matters that loans are not securities. Because Kirschner and Banco Español place syndicated loans outside the securities laws, trading the loan on the basis of borrower MNPI does not implicate the federal insider trading prohibitions in the way trading the borrower's equity or bonds would. The market's discipline comes from contractual confidentiality undertakings, big-boy letters, and institutional policy rather than from statute.

Big-boy letters. In a secondary loan trade where one side may hold information the other does not, the parties often exchange representations acknowledging the asymmetry and waiving claims based on it. They are common, they are not bulletproof, and they do not cure fraud.

The practical hazards. A lender's private-side desk receiving borrower projections and its public-side desk trading the borrower's bonds, with a wall that exists on paper. A restructuring negotiation in which a creditor becomes "restricted" — unable to trade — and must decide whether the seat at the table is worth the illiquidity. And a cleansing obligation: borrowers typically agree that if negotiations end without a deal, they will publicly disclose the MNPI so participants can trade again.

For counsel, three habits. Confirm which side of the wall the client is on before any conversation. Get the cleansing mechanic in writing, with a deadline, before the client goes restricted. And treat the confidentiality undertaking in the credit agreement as a real obligation with real remedies — because it is the only one there is.

The collateral package

Guarantors. The borrower and each restricted subsidiary that is a domestic wholly-owned entity, subject to excluded-subsidiary carve-outs: immaterial subsidiaries below a threshold, foreign subsidiaries, entities prohibited by law or by contract from guaranteeing, and captive insurance or securitization vehicles. The excluded-subsidiary list is where guarantee coverage quietly erodes, and a materiality threshold expressed as a percentage of consolidated EBITDA can exclude a great deal after a few years of decline.

Collateral. A security interest in substantially all assets, perfected under Article 9 by filing for most collateral, by control for deposit and securities accounts, and by delivery for certificated securities and instruments. Intellectual property security agreements are recorded with the relevant federal offices in addition to the Article 9 filing.

Excluded assets. Commonly: real property below a threshold; motor vehicles and other certificate-of-title assets; assets subject to a purchase money lien where the lien prohibits further encumbrance; letter-of-credit rights below a threshold; and — importantly — equity of foreign subsidiaries above a stated percentage, historically limited for tax reasons.

Deposit account control agreements. Required for material accounts, often after a grace period and sometimes only on a springing basis after an event of default. Springing control is far weaker than it sounds, because the moment the lender needs control is the moment the borrower has the least incentive to sign.

Post-closing obligations. Nearly every facility closes with a post-closing letter listing items to be delivered within thirty to ninety days: control agreements, landlord waivers, insurance endorsements, foreign collateral, and title work. Post-closing items that are never delivered are a recurring and entirely avoidable gap, and the agent should track them to closure rather than to expiry of the deadline.

Why the package matters to the intercreditor analysis. The second lien secures the same collateral; the ABL secures a subset with priority. Every gap in the first lien package is a gap in both, and every excluded asset is an asset available to a drop-down transaction later.

Practice pointers

Make subordination of liens and claims a sacred right. It is the single most valuable addition a lender can make to a modern credit agreement.

Make pro rata sharing unamendable without unanimity, and define "open market purchase" precisely or delete the exception.

Block collateral leakage directly: prohibit transfers of material intellectual property and specified assets to unrestricted subsidiaries regardless of basket capacity, and require fair value in cash for any asset transfer out of the credit group.

Cap EBITDA add-backs and require third-party support for run-rate synergies above a threshold. Ratio-based capacity is only as disciplined as the ratio.

Read the debt and lien covenants together. A debt basket without a matching lien basket permits unsecured debt only — and the reverse mismatch is where surprises live.

Maintain the disqualified institution list, and define affiliates broadly enough that it works.

Understand that you have no fiduciary. Each lender makes its own credit decision, and the agent's disclaimers mean what they say.

For junior lenders, price the intercreditor agreement, not just the coupon. Standstill length, bankruptcy waivers, and the credit bid right determine what the position is actually worth.

Organize early. A cooperation agreement assembled before a transaction is announced is worth more than any covenant; assembled after, it is a negotiating posture.

Remember that priority survives the filing. Section 510(a) makes the intercreditor agreement enforceable in bankruptcy, and RadLAX protects the credit bid — which is why what you gave away in the intercreditor agreement is what you will miss most.