Inter Lender Agreement Template for Canada

An Inter Lender Agreement is a critical legal document that governs the complex relationships between multiple lenders participating in the same financing transaction. When you're involved in multi-tier lending arrangements, this agreement ensures all parties understand their rights, obligations, and priority positions while preventing costly disputes that could jeopardize the entire financing structure.

When do you need this document?

You'll require an Inter Lender Agreement whenever multiple lenders with different risk profiles and return expectations participate in financing the same borrower. This commonly occurs in syndicated lending where senior banks, mezzanine lenders, and subordinated debt providers each require different terms and security positions. Project financing scenarios, particularly in infrastructure, energy, or real estate development, frequently necessitate these agreements to coordinate construction lenders, term lenders, and working capital facilities. Leveraged buyout transactions almost invariably require inter-lender arrangements to manage relationships between senior debt, subordinated debt, and equity bridge financing. Private equity transactions involving multiple funding sources also depend on these agreements to establish clear waterfall provisions and enforcement protocols.

Key legal considerations

The agreement must clearly establish debt ranking and subordination provisions, ensuring senior lenders receive priority in payment waterfalls and enforcement scenarios. Security sharing arrangements require careful drafting to comply with Personal Property Security Act requirements while avoiding preferences under insolvency legislation. Voting rights provisions determine which lenders can initiate enforcement actions, modify terms, or consent to borrower requests, typically based on commitment size or seniority. Standstill provisions prevent junior lenders from taking enforcement actions that could prejudice senior creditors' positions. Information sharing clauses must balance transparency requirements with confidentiality obligations, particularly regarding commercially sensitive borrower information. Cross-default and cross-acceleration provisions ensure coordinated responses to borrower defaults while preventing individual lenders from triggering cascading defaults.

Legal requirements in Canada

Canadian Inter Lender Agreements must comply with federal Bank Act requirements when chartered banks participate, including restrictions on certain security interests and mandatory disclosure provisions. Provincial Personal Property Security Act legislation governs security interest creation, perfection, and priority, requiring careful attention to registration requirements and search procedures. The Bankruptcy and Insolvency Act and Companies' Creditors Arrangement Act establish statutory priority schemes that your agreement cannot override, making compliance essential for enforceability during insolvency proceedings. Interest Act provisions may limit interest rates and compounding arrangements, particularly for subordinated debt tranches. Provincial corporate law requirements apply to guarantee provisions and corporate authorizations, while securities law compliance may be necessary if debt instruments are broadly distributed. Each participating lender must ensure their internal credit policies and regulatory capital requirements align with the agreed priority structure and risk allocation.