Intercreditor Agreements: A Grey Area Of The Law

Law360, New York (August 3, 2007, 12:00 AM EDT) -- With the virtual explosion of second lien financings in recent years, the next wave of major bankruptcies will present numerous issues regarding the enforceability of various aspects of intercreditor agreements between first lien and second lien lenders.

While lien subordination and payment subordination are clearly enforceable under § 510(a) of the Bankruptcy Code, there is uncertainty regarding the enforceability of provisions in intercreditor agreements that affect fundamental bankruptcy rights.

Many intercreditor agreements purport to transfer or limit the junior creditor's exercise of fundamental bankruptcy rights, such...
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