The primacy of rights over insurance payments is generally not contested where the payments relate to accidental damages or convictions of identifiable property, with the priority right to payments following the primacy of the deposit over the underlying asset. However, the parties to an interconnection agreement on shared guarantees should also take into account the priority of their rights to different types of other exceptional revenues, such as. B business interruption insurance. The cash-maturing lender will argue that in the event of an interruption in the borrower`s business, it is more vulnerable than the ABL lender and should therefore have the greater right to these insurance payments. Another method of allocating these payments is for secured lenders to share these ratified payments, based on the nominal outstanding debt owed to each lender at the time of payment of the insurance entitlement. This article focuses on the main provisions typically contained in an inter-creditor agreement on shared collateral and discusses the underlying nuances and tensions that in some cases lead to more favorable treatment for the ABL lender and, in other cases, more favorable treatment of the lender. The fundamental proposal of the Term Lender is that, although it is prepared to have a subordinated pledge right in the pool of collateral in the priority interest of the lender ABL, the holder of the senior guarantee should not enjoy unlimited advantages of its priority status, but should enjoy a benefit limited to a clearly defined dollar amount. In other words, the concept of lender will argue that the ABL lender`s right of priority pledge can only guarantee up to `x` dollars and that all the proceeds of the collateral reserve on which the ABL lender has a priority pledge right may be applied by the ABL lender to the obligations owed to it will be limited to that amount. For example, if, at the time the ABL lender engages in a recourse exercise, the outstanding revolving loans it has granted to the borrower amounts to $37 million, the amount of the dollar ceiling agreed in the inter-creditor agreement is $32 million and the proceeds of the guarantee reserve, which is subject to the priority pledge right of the lender ABL, amounts to $34 million. The waterfall provisions of the interconnection agreement would then allow the ABL lender to withhold only $32 million and claim against revolving loans, and would then require the ABL lender to remit the remaining $2 million in security to the lender. Two specific concessions concerning the notion of lender in favour of the working capital lender are now common in split-collateral intercrediting agreements. After taking control of its priority deposit guarantees, the lender will agree to grant the ABL lender: (1) access to the agencies of the loan parties for a period – often 90 days – for the purpose of completing the inventory, reviewing accounts and registrations and implementing its own secured assistance to creditors at the borrower`s premises (and agrees: the provision of ownership of the premises to a third-party buyer for the same period) and (2) a license to use the intellectual property, such as for example.
B trademarks, to assert its interest in the security of one of its priority guarantees, such as.B. the intact disposal of the inventory with all applicable marks. . . .