"Waterfall":  Priority of Application of Proceeds

Summary

This practice note discusses the "waterfall" of an intercreditor agreement. Generally speaking, a "waterfall" refers to the order of application of funds or proceeds and is a repayment mechanism by which funds from a loan are paid out in an enforcement scenario. An intercreditor agreement should set out the payment obligations from the proceeds of the borrower's collateral as between the holders of different levels of first lien debt and second lien debt.