Subordination Agreement (Related Party Loans)

Summary

This precedent is a Subordination Agreement for Related Party Loans. The precedent is useful in a scenario whereby a related party or an affiliate of a borrower under a loan agreement (e.g., an intercompany loan agreement) provides a loan to the borrower, and a lender under a senior loan agreement with the borrower requires the related party to subordinate its rights to repayments from the borrower under the related party loan agreement in favour of the rights of the lender under the senior loan agreement. It contains practical guidance and drafting notes. The precedent is intended for use between a senior lender and the borrower, and is used in secured loan transactions. Where the borrower is indebted to the related parties, the senior lender will usually require that all related parties that have made loans to the borrower execute this document as a condition precedent to closing and funding. For example, a subsidiary can act as a guarantor to a borrower, or otherwise provide loans ...