Intercreditor Agreement Template for the United Arab Emirates

An Intercreditor Agreement is a critical legal document that establishes the hierarchy of rights, priorities, and obligations between multiple creditor groups in complex financing arrangements. In the United Arab Emirates, you need this agreement whenever your financing structure involves different classes of debt or multiple lender groups with varying risk profiles and security entitlements.

When do you need this document?

You require an Intercreditor Agreement in several key scenarios within the UAE financing landscape. These include syndicated loan facilities where senior and junior lenders participate with different terms, project finance transactions involving construction lenders, term lenders, and potentially Islamic finance providers, and acquisition finance structures with senior debt, mezzanine financing, and shareholder loans. The document is also essential in restructuring situations where existing creditors agree to new payment hierarchies, real estate developments with multiple financing sources, and any transaction involving security agents managing collateral on behalf of multiple creditor groups.

Key legal considerations

Your Intercreditor Agreement must carefully address several critical legal elements to ensure enforceability and effectiveness. Payment waterfall provisions must clearly establish the order of distributions from recoveries, ensuring senior creditors receive priority while protecting junior creditors' residual rights. Security sharing arrangements require detailed provisions on how collateral is held, administered, and enforced among creditor groups. Enforcement restrictions are crucial, preventing junior creditors from taking independent enforcement actions that could prejudice senior creditors' positions. The agreement must include comprehensive standstill provisions, consultation requirements before enforcement, and clear dispute resolution mechanisms. Additionally, you need robust provisions addressing amendments, waivers, and the treatment of hedge counterparties and intra-group lenders.

Legal requirements in United Arab Emirates

Under UAE law, your Intercreditor Agreement must comply with specific federal legislation and regulatory requirements. UAE Federal Law No. 5 of 1985 (Civil Code) governs the fundamental contractual principles and party obligations, while UAE Federal Law No. 18 of 1993 (Commercial Code) regulates the commercial aspects of the arrangement. Crucially, you must ensure compliance with UAE Federal Law No. 9 of 2016 (Bankruptcy Law) regarding creditor rights and priority claims in insolvency scenarios. Security interests must be perfected according to UAE requirements, and if Islamic finance providers are involved, Shariah compliance considerations become mandatory. The Central Bank Law (Federal Law No. 14 of 2018) may impose additional requirements for regulated financial institutions. Your agreement should include Arabic translations of key terms and ensure compliance with any applicable free zone regulations if the borrower or guarantors operate within UAE free zones.