Loan Subordination Agreement for New Zealand

Loan Subordination Agreement Template for New Zealand

A comprehensive legal agreement governed by New Zealand law that establishes and regulates the priority of different debt obligations between creditors. The document sets out the terms under which one or more creditors agree to subordinate their debt claims to those of senior creditors, including provisions for payment restrictions, enforcement limitations, and turnover obligations. It incorporates specific requirements under New Zealand's Contract and Commercial Law Act 2017 and considers relevant financial markets legislation, making it suitable for both corporate and structured finance transactions in the New Zealand market.

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What is a Loan Subordination Agreement?

The Loan Subordination Agreement is a crucial document in structured finance and corporate lending transactions in New Zealand. It becomes necessary when a company has multiple creditors and needs to establish a clear hierarchy of payment and enforcement rights. This agreement is particularly important in scenarios such as refinancing, corporate restructuring, or when new debt is being introduced alongside existing facilities. The document details how different classes of debt rank in priority, regulates payments to subordinated creditors, and establishes enforcement restrictions. It must comply with New Zealand's financial regulations, including the Contract and Commercial Law Act 2017, Companies Act 1993, and Personal Property Securities Act 1999. The agreement is commonly used in conjunction with facility agreements, security documents, and intercreditor arrangements.

What sections should be included in a Loan Subordination Agreement?

1. Parties: Identifies all parties to the agreement including the debtor, senior creditor(s), and subordinated creditor(s)

2. Background: Recitals explaining the existing loan arrangements and the purpose of the subordination

3. Definitions and Interpretation: Defines key terms including Senior Debt, Subordinated Debt, Enforcement Action, and Payment

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

5. Undertakings by Subordinated Creditor: Key promises by the subordinated creditor regarding their debt and enforcement rights

6. Payments: Rules governing payments to the subordinated creditor, including payment stops

7. Turnover of Receipts: Obligations to turn over any unauthorized payments received

8. Senior Creditor Rights: Rights of the senior creditor including enforcement and amendment of senior facilities

9. Duration: Period of effectiveness of the subordination arrangements

10. General Provisions: Standard boilerplate including notices, amendments, governing law, and jurisdiction

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

1. Security Subordination: Required if there are security interests that need to be subordinated in addition to the debt itself

2. Permitted Payments: Include when certain payments to subordinated creditors are allowed under specific conditions

3. Further Subordinated Creditors: Include when mechanism needed for additional creditors to accede to the agreement

4. Insurance and Recovery Proceeds: Include when there are specific arrangements for handling insurance payouts or other recoveries

5. Subordinated Creditor Committee: Include when there are multiple subordinated creditors requiring coordinated decision-making

6. Standstill Provisions: Include when specific restrictions on enforcement actions need to be detailed

7. Buy-out Rights: Include when subordinated creditors have rights to buy out senior debt under certain circumstances

What schedules should be included in a Loan Subordination Agreement?

1. Schedule 1 - Senior Facilities: Details of all senior loan facilities including dates, amounts, and lenders

2. Schedule 2 - Subordinated Facilities: Details of all subordinated loan facilities including dates, amounts, and lenders

3. Schedule 3 - Form of Accession Deed: Standard form for additional creditors to join the agreement

4. Schedule 4 - Payment Conditions: Detailed conditions under which permitted payments can be made to subordinated creditors

5. Schedule 5 - Security Interests: List of all relevant security interests and their priorities

6. Appendix A - Notice Details: Contact information and notice requirements for all parties

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

New Zealand

Publisher

Genie AI

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions
Relevant Industries

Banking

Financial Services

Private Equity

Investment Management

Real Estate

Construction

Manufacturing

Mining

Agriculture

Retail

Healthcare

Technology

Relevant Teams

Legal

Finance

Treasury

Risk Management

Corporate Banking

Credit

Compliance

Corporate Advisory

Debt Recovery

Company Secretariat

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Corporate Lawyer

Legal Counsel

Finance Manager

Credit Manager

Risk Manager

Investment Manager

Debt Restructuring Advisor

Corporate Banking Manager

Loan Officer

Company Secretary

Financial Controller

Insolvency Practitioner

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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