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Momentive Disrupts Intercreditor Agreements And Reorgs

Law360 (February 8, 2019, 4:39 PM EST) -- Second lien financing is often an attractive source of capital for companies because it typically has a lower interest rate than unsecured debt. The second lien lender, meanwhile, is assured the residual value of the collateral shared with the first lien lender if the borrower defaults on the loan. To set out the rights and obligations of senior secured creditors vis-à-vis junior ones — including priority of payment — an intercreditor agreement is normally executed in conjunction with the underlying loan agreements.

One of the critical issues that must be addressed in an intercreditor agreement is whether it will provide for lien...

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