Loan Subordination Agreement Template for Switzerland

A Swiss law-governed Loan Subordination Agreement is a legal document that establishes the priority ranking between different classes of debt owed by a debtor to various creditors. It sets out the terms under which junior (subordinated) debt is contractually subordinated to senior debt, including restrictions on payments, enforcement actions, and the turnover of unauthorized receipts. The agreement operates within the framework of Swiss contract law and bankruptcy regulations, particularly the Swiss Code of Obligations and the Federal Act on Debt Enforcement and Bankruptcy, providing clarity on creditor rights and obligations in both normal operations and distressed scenarios.

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What is a Loan Subordination Agreement?

The Loan Subordination Agreement is a crucial document in corporate finance and debt structuring under Swiss law, typically used when a company has multiple layers of debt with different priorities. This agreement becomes essential in scenarios where new debt is being introduced alongside existing obligations, during corporate restructurings, or in preparation for potential financial distress situations. The document establishes a clear hierarchy between creditors, with senior creditors having priority over subordinated creditors in terms of payment rights and enforcement actions. The agreement must comply with Swiss legal requirements, particularly the Swiss Code of Obligations and bankruptcy laws, and typically includes detailed provisions on payment restrictions, turnover obligations, and creditor rights. A well-structured Loan Subordination Agreement is fundamental for maintaining clear creditor relationships and providing certainty in enforcement scenarios.

What sections should be included in a Loan Subordination Agreement?

1. Parties: Identification of the parties: Senior Creditor(s), Subordinated Creditor(s), and the Debtor

2. Background: Context of the existing loans and reason for subordination

3. Definitions and Interpretation: Definitions of key terms including Senior Debt, Subordinated Debt, Enforcement Action, etc.

4. Subordination: Core provisions establishing the subordination of the junior debt to the senior debt

5. Restrictions on Subordinated Debt: Limitations on payments, enforcement actions, and amendments relating to subordinated debt

6. Turnover of Receipts: Obligation to turn over any unauthorized payments received in respect of subordinated debt

7. Subrogation Rights: Provisions regarding subrogation rights of the subordinated creditor

8. Duration: Term of the subordination arrangement and conditions for termination

9. Representations and Warranties: Standard representations regarding authority, binding obligations, and no conflicts

10. Further Assurance: Obligation to take additional actions to give effect to the agreement

11. Notices: Process for giving notices under the agreement

12. Governing Law and Jurisdiction: Specification of Swiss law as governing law and jurisdiction for disputes

What sections are optional to include in a Loan Subordination Agreement?

1. Security: Required if there is any security package that needs to be addressed in the subordination arrangement

2. Accession Provisions: Needed if there is a possibility of additional creditors joining the subordination arrangement

3. Amendments and Waivers: Detailed provisions for modifications if there are multiple creditors

4. Senior Creditor Rights: Additional provisions regarding senior creditors' rights if there are multiple senior creditors

5. Subordinated Creditor Protections: Specific protections for subordinated creditors in certain scenarios, if negotiated

6. Information Rights: Provisions regarding information sharing between creditors, if relevant

7. Cost and Expenses: Allocation of costs if there are multiple parties or complex arrangements

What schedules should be included in a Loan Subordination Agreement?

1. Existing Senior Debt: Details of all senior debt facilities covered by the agreement

2. Existing Subordinated Debt: Details of all subordinated debt facilities covered by the agreement

3. Form of Accession Deed: Standard form for new creditors to accede to the agreement

4. Form of Subordination Notice: Standard form of notice to be given to relevant parties regarding the subordination

5. Payment Conditions: Specific conditions under which payments on subordinated debt may be permitted

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Switzerland

Publisher

Genie AI

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions
Relevant Industries

Banking

Financial Services

Corporate Lending

Private Equity

Investment Management

Real Estate

Manufacturing

Technology

Infrastructure

Healthcare

Retail

Mining and Resources

Relevant Teams

Legal

Finance

Treasury

Credit Risk

Corporate Banking

Debt Management

Restructuring

Compliance

Corporate Development

Investment

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Corporate Lawyer

Legal Counsel

Finance Manager

Credit Manager

Restructuring Officer

Investment Manager

Debt Fund Manager

Banking Relationship Manager

Risk Manager

Corporate Banking Officer

Loan Officer

Compliance Officer

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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