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An “intercreditor agreement” is a form of agreement between secured creditors of a common debtor that defines the priority, remedies and rights among such creditors as they pertain to their common debtor. Typically, an intercreditor agreement confirms or modifies the preexisting priority rankings of the senior and junior lienholders relative to each other and, additionally, modifies, waives or assigns various contract, statutory or common law rights or remedies against the debtor to which the junior lienholder otherwise would be entitled to assert. In the past, understandings between a debtor’s creditors were more frequently governed by a subordination agreement due to the predominance of companies who financed their operations using both secured indebtedness and unsecured bond debt. In other words, the holders of the bond indebtedness agreed to condition their right of payment upon the prior repayment of the secured indebtedness. However, over the last 15 years, companies have utilized first/second lien debt structures with increasing frequency in order to take advantage of the lower borrowing costs that such structures afford and, therefore, the use of intercreditor agreements has become much more prevalent.

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