Intercreditor Agreement Template for Australia

An Intercreditor Agreement is a critical legal document that governs relationships between multiple creditors in complex financing arrangements. When your business involves syndicated loans, mezzanine financing, or structured debt arrangements, this agreement establishes clear hierarchies of creditor rights and payment priorities. It ensures that all parties understand their position in the creditor waterfall and prevents conflicts during both normal operations and enforcement scenarios.

When do you need this document?

You need an Intercreditor Agreement when multiple creditors are providing different layers of debt to the same borrower. This commonly occurs in large corporate acquisitions where senior banks provide primary facilities, mezzanine lenders offer subordinated debt, and bondholders hold notes with different ranking. The agreement is essential in restructuring scenarios where existing creditors must coordinate with new lenders. You'll also require this document in project finance transactions involving multiple funding sources, or when hedge counterparties provide derivative facilities alongside traditional lending arrangements.

Key legal considerations

The ranking and priority provisions are fundamental to your intercreditor arrangement, establishing which creditors receive payment first during enforcement or insolvency proceedings. Payment waterfall clauses must clearly define how proceeds flow between creditor groups, including fees, interest, and principal amounts. Enforcement restrictions prevent junior creditors from taking action that might prejudice senior creditors' rights. Security sharing arrangements ensure all creditors benefit from common security packages while respecting priority rankings. Voting and consent mechanisms establish thresholds for major decisions affecting the borrower or security. Turnover provisions require junior creditors to hand over payments received in breach of the priority ranking to senior creditors.

Legal requirements in Australia

Your Intercreditor Agreement must comply with the Corporations Act 2001 (Cth), particularly provisions governing security interests, corporate insolvency, and creditors' rights. The Personal Property Securities Act 2009 (Cth) governs security interest registration and priority, making proper PPSR registration essential for maintaining agreed priorities. You must consider Banking Act 1959 (Cth) requirements if regulated financial institutions are involved in the creditor group. The agreement should address Australian insolvency law principles, including creditor committee formation and scheme of arrangement procedures. Enforcement provisions must align with Australian court procedures and recognise statutory priorities that may override contractual arrangements. If any underlying facilities involve consumer credit, National Consumer Credit Protection Act 2009 (Cth) compliance may be required, affecting creditor rights and enforcement mechanisms.