Intercreditor Agreement Template for Nigeria

An Intercreditor Agreement sets the rules between multiple lenders who are lending money to the same borrower. In Nigeria's financial sector, these agreements help prevent conflicts when different banks or financial institutions share the risk of a large loan, especially for major infrastructure or real estate projects.

The agreement spells out key details like payment priorities, security interests, and what happens if the borrower defaults. For example, when a Nigerian commercial bank and a development finance institution both fund a project, the intercreditor agreement makes it clear who gets paid first and who has the right to take action against the borrower. This clarity helps protect all lenders and makes complex financing deals possible.

Use an Intercreditor Agreement when multiple lenders plan to finance the same Nigerian business or project. This becomes essential for large-scale developments, like infrastructure projects or real estate ventures, where a single lender can't provide all the needed capital. It's particularly important when mixing different types of lenders - such as local commercial banks working alongside international development institutions.

The agreement becomes crucial before disbursing any funds, especially when lenders have different security interests or lending priorities. For example, when financing a Lagos commercial building project with both secured and unsecured loans, the Intercreditor Agreement prevents future disputes by clearly establishing payment rankings and enforcement rights upfront.

• Senior-Subordinate Structure: Most common in Nigeria's banking sector, establishing clear payment priorities between primary and secondary lenders
• Pari Passu Agreements: All lenders share equal ranking and rights, typically used in syndicated loans for large infrastructure projects
• First-Second Lien Structure: Popular in real estate financing, defining rights between primary mortgage holders and secondary lenders
• Split Collateral Arrangements: Different lenders have exclusive rights to specific assets, common in manufacturing sector financing
• Mezzanine Debt Agreements: Used when combining traditional bank loans with alternative financing, especially in commercial development projects

• Commercial Banks: Primary lenders who initiate and coordinate Intercreditor Agreements, often leading syndicated loans for major projects
• Development Finance Institutions: International and Nigerian institutions providing long-term project financing alongside commercial lenders
• Corporate Legal Teams: Draft, review, and negotiate agreement terms to protect their institution's interests
• Borrowing Companies: Usually large corporations or project developers who need multiple funding sources
• Security Trustees: Manage collateral and enforce security rights on behalf of multiple lenders
• Financial Regulators: Monitor compliance with Central Bank of Nigeria guidelines on multi-lender arrangements

• Lender Details: Gather full legal names, registration numbers, and contact information for all participating financial institutions
• Loan Structure: Document each lender's commitment amount, interest rates, and security interests
• Payment Priorities: Establish clear ranking of lenders and payment waterfall arrangements
• Security Package: List all collateral assets and their allocation among lenders
• Enforcement Rights: Define specific actions each lender can take during default scenarios
• Regulatory Compliance: Verify alignment with Central Bank of Nigeria's lending guidelines
• Borrower Information: Collect corporate documents, financial statements, and existing loan agreements

• Identification Section: Full legal names and details of all participating lenders and the borrower
• Ranking Provisions: Clear hierarchy of lenders' rights and payment priorities
• Security Sharing: Detailed allocation of collateral and enforcement rights among lenders
• Standstill Clauses: Rules preventing individual lender actions during specified periods
• Payment Waterfall: Precise order of payment distribution among lenders
• Default Procedures: Specific actions and remedies available to each lender
• Governing Law: Express choice of Nigerian law and jurisdiction
• Amendment Process: Clear procedures for modifying agreement terms

An Intercreditor Agreement differs significantly from a Bond Issuance Agreement in several key aspects, though both deal with complex financing arrangements in Nigeria. The main distinctions lie in their purpose, parties involved, and legal framework.

• Primary Purpose: Intercreditor Agreements manage relationships between multiple lenders sharing the same borrower, while Bond Issuance Agreements govern the relationship between a single issuer and multiple bondholders
• Legal Structure: Intercreditor Agreements focus on lender hierarchy and enforcement rights, whereas Bond Issuance Agreements establish terms for debt securities and investor rights
• Regulatory Framework: Bond Issuance Agreements must comply with SEC Nigeria's securities regulations, while Intercreditor Agreements primarily follow banking regulations
• Enforcement Mechanism: Intercreditor Agreements detail specific recovery actions for each lender, while Bond Issuance Agreements typically use a trustee structure for collective enforcement