Intercreditor Agreement
Corporate Credit Analysis glossary · Capital Structure & Debt Mechanics
Definition
An agreement among creditors of different instruments specifying their rights vis-à-vis each other, particularly in default scenarios. Governs collateral-sharing, payment waterfalls, and voting rights between senior and junior lenders.
Intercreditor Agreement in plain English
When a company borrows from several lenders at once, some are first in line to get paid back and others are further back. An intercreditor agreement is the rulebook those lenders sign amongst themselves, spelling out who gets repaid first, who can seize shared collateral, and whose vote counts if the company runs into trouble. Think of siblings splitting an inheritance and agreeing in advance who gets the house and who gets the car, so nobody fights when the moment actually comes. It matters most in a default, when there isn't enough money to make everyone whole and the order of the line decides who wins and who loses.
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