This is a long-standing working group led by Ruth Harris, Ashurst, which seeks to develop materials to support the market in relation to intercreditor arrangements. Meetings and other discussions are arranged as required.
Four papers are now available, covering different aspects of this complex and evolving market.
Click here to view the first of a series of papers, in which CREFC Europe members share their experiences in relation to a selection of the structures that are being used to finance commercial real estate, some of the commonly negotiated provisions found in intercreditor agreements and some of the traps for the unwary. The experiences are from a variety of transactions, but it is clearly the case (i) that the category of real estate asset; (ii) the leverage (and split between lenders); and (iii) the type of lender (debt fund, insurer, pension fund, bank..) as well as the funding structure, will all have bearing on the outcome of the intercreditor relationship.
The focus of this first paper is on a selection of the structures that are being used to finance commercial real estate. We also provide a glossary of terms of art that are often used, and often misunderstood, in relation to structured lending.
Click here to view the second paper which focuses on the subordination of payments to the junior finance parties and the concepts of property protection loans, senior headroom, cash trap events, junior payment stop events and escrow of monies that would otherwise have been available to pay amounts due to the junior finance parties (absent the junior payment stop event).
Click here to see the third paper in the series, which focuses on intercreditor agreements where structural subordination is not available, including whole loan structures and cases where the obligors themselves are not party to the intercreditor arrangements (for example a “behind the scenes” intercreditor arrangement, or “agreement amongst lenders”), and as such the tranching and pricing is not transparent to the obligors.
Click here to view the fourth in the series of papers, in which CREFC Europe members share their experiences in relation to the conversations that they are commonly having around the security package and enforcement rights. It looks at the drivers behind the mezzanine lender's request to have security over the properties and any conditions that may be imposed on any enforcement rights; cross default questions; the importance of the separate mezzanine share security package and any conditions around exercising enforcement rights; senior standstills; and releases of security and liabilities upon enforcement.
CREFC Europe members of the ICA Working Group welcome your comments on these papers. The intention is that these should be living documents, where terms of art and new structures are added from time to time, and experiences in relation to negotiation of intercreditor agreements and work outs are shared, including any insight on traps for the unwary.