Structuring Trade Credit Insurance and Reverse Factoring Facilities to Support Rapid Growth
Combining insured receivables with approved payables facilities unlocks working capital during rapid scaling while preserving lender covenant headroom.
Senior Lender Intercreditor Agreement
Meaning
Financing contract that defines the relative rights and priorities of different creditors providing funds to the same borrower. A senior lender intercreditor agreement establishes the order of payment and the control of collateral in the event of a default. It prevents disputes between lenders by setting clear rules for restructuring or liquidation.
Priority Ranking
Ranking of the claims determines who gets paid first from the available assets of the company. Senior lenders typically have a first-priority lien, meaning they must be fully satisfied before any junior or mezzanine creditors receive funds.
Payment Sequence
Sequence of cash flows is managed through a waterfall mechanism that dictates how interest and principal are distributed. During normal operations, both lenders might receive payments, but if a trigger event occurs, the junior lender must stop taking money until the senior debt is cleared. This standstill provision protects the primary creditor from losing their capital.
Default Coordination
Coordination between the creditors is required to manage the enforcement of the security. The agreement specifies which lender has the right to lead the foreclosure or the sale of the company assets. This unified approach avoids multiple lawsuits and preserves the value of the business for all parties involved.