Intercreditor Deed Template for Saudi Arabia

An Intercreditor Deed is a critical legal agreement that governs the relationship between multiple creditors in complex financing transactions under Saudi Arabian law. When you have senior creditors, mezzanine lenders, Islamic finance providers, and other parties involved in a single financing arrangement, this document establishes clear hierarchies, payment priorities, and enforcement procedures while ensuring full compliance with Sharia principles and local banking regulations.

When do you need this document?

You need an Intercreditor Deed in sophisticated financing structures where multiple classes of creditors participate. This typically occurs in large-scale project finance for infrastructure developments, real estate ventures involving both conventional and Islamic financing, corporate restructuring with multiple lender groups, and acquisition financing with senior and subordinated debt. The document is particularly essential when Islamic finance providers participate alongside conventional lenders, as it must reconcile different financing principles while maintaining Sharia compliance. You also require this deed in syndicated facilities where different tranches have varying security priorities, or when hedge counterparties and guarantee providers need coordinated rights.

Key legal considerations

The ranking and priority provisions form the cornerstone of your Intercreditor Deed, establishing which creditors receive payments first during normal operations and enforcement scenarios. You must carefully structure payment waterfalls that respect both conventional intercreditor principles and Islamic finance requirements, ensuring that profit-sharing arrangements for Islamic lenders align with Sharia law while maintaining clear subordination hierarchies. Security sharing arrangements require detailed consideration, particularly regarding how different types of Islamic and conventional security interests interact. Your deed must address enforcement restrictions, including circumstances where junior creditors cannot take independent action and standstill periods that allow senior creditors to pursue remedies first. Turnover provisions ensuring that junior creditors transfer any proceeds received in contravention of the priority structure are crucial for maintaining the agreed hierarchy.

Legal requirements in Saudi Arabia

Under Saudi Arabian law, your Intercreditor Deed must comply with the Banking Control Law (Royal Decree No. M/5) which regulates creditor rights and banking activities. The Islamic Banking Law requires that any provisions involving Islamic finance providers strictly adhere to Sharia principles, prohibiting riba (interest) and ensuring profit-and-loss sharing arrangements comply with Islamic jurisprudence. The Commercial Mortgage Law (Royal Decree No. M/75) governs how different security interests rank against each other, while the Bankruptcy Law (Royal Decree No. M/50) establishes creditor priorities in insolvency proceedings that your deed must reflect. SAMA guidelines require specific disclosures and approval processes for certain intercreditor arrangements involving regulated financial institutions. Your document must be structured to allow enforcement through the Commercial Courts under Royal Decree No. M/93, ensuring that dispute resolution mechanisms align with local court procedures and Islamic legal principles where applicable.