Intercreditor Agreement Template for Malaysia

An Intercreditor Agreement sets out the rights and priorities between different lenders who provide loans to the same borrower. In Malaysia's banking sector, these agreements help manage complex financing arrangements where multiple banks or financial institutions share the same collateral.

The agreement spells out crucial details like who gets paid first if the borrower defaults, how secured assets are shared, and when lenders can take enforcement actions. For example, in Malaysian project financing deals, it ensures senior lenders maintain priority over subordinate creditors while establishing clear rules for handling loan recoveries and enforcing security under local banking regulations.

Companies need an Intercreditor Agreement when multiple lenders are financing the same project or borrower in Malaysia. This typically happens in syndicated loans, project financing, or when a business takes both secured and unsecured loans from different banks or financial institutions.

These agreements become essential during debt restructuring, refinancing, or when adding new lenders to existing loan arrangements. For example, when a Malaysian property developer seeks additional funding from a second bank while maintaining their original loan, an Intercreditor Agreement prevents conflicts by clearly defining each lender's rights, priorities, and enforcement powers under Bank Negara Malaysia's guidelines.

• Senior-Subordinate Structure: Common in Malaysian corporate financing, establishing clear payment priorities between primary and secondary lenders
• Pari Passu Arrangement: Gives equal rights to multiple lenders, often used in syndicated loans under Malaysian banking regulations
• First-Second Lien: Defines rights between secured creditors with different security interests, popular in Malaysian property development financing
• Project Finance Structure: Coordinates multiple lenders in large infrastructure projects, following Malaysian Securities Commission guidelines

• Primary Lenders: Usually Malaysian banks or financial institutions that provide the main financing and hold first-ranking security interests
• Secondary Lenders: Financial institutions offering additional financing with subordinated rights, including mezzanine financiers
• Corporate Borrowers: Malaysian companies receiving multiple loans, responsible for complying with various lender requirements
• Legal Counsel: Malaysian lawyers who draft and negotiate the agreement terms, ensuring compliance with local banking regulations
• Security Trustees: Entities appointed to hold and manage security interests on behalf of multiple lenders

• Loan Details: Gather information about all existing and proposed loans, including amounts, interest rates, and security arrangements
• Lender Priorities: Document each lender's ranking, payment rights, and enforcement powers under Malaysian banking regulations
• Security Assets: List all collateral and security interests, ensuring compliance with Malaysian property and securities laws
• Default Procedures: Define clear enforcement steps and remedies available to each lender group
• Approval Requirements: Confirm internal authorization needs and Bank Negara Malaysia's compliance requirements

• Parties and Definitions: Clear identification of all lenders, borrowers, and key terms used throughout the agreement
• Payment Hierarchy: Detailed waterfall provisions specifying the order of payments under Malaysian banking regulations
• Security Sharing: Rules for sharing and enforcing security interests under Malaysian property laws
• Standstill Provisions: Restrictions on individual lender actions during default scenarios
• Enforcement Protocol: Step-by-step procedures for exercising rights against security
• Governing Law: Explicit statement choosing Malaysian law and jurisdiction

An Intercreditor Agreement differs significantly from an Asset Purchase Agreement in both purpose and scope within Malaysia's legal framework. While both documents deal with financial arrangements, they serve distinct functions in business transactions.

• Primary Purpose: Intercreditor Agreements manage relationships between multiple lenders, while Asset Purchase Agreements govern the sale and transfer of specific assets between a buyer and seller
• Parties Involved: Intercreditor Agreements primarily involve multiple financial institutions and one borrower, whereas Asset Purchase Agreements typically involve just two main parties - the asset seller and buyer
• Legal Focus: Intercreditor Agreements concentrate on lending priorities and security rights under Malaysian banking laws, while Asset Purchase Agreements focus on ownership transfer and warranties under commercial law
• Timing and Duration: Intercreditor Agreements remain active throughout the loan period, but Asset Purchase Agreements generally conclude once the asset transfer is complete