Intercreditor Agreement
Definition
An intercreditor agreement (ICA) is a contract among different classes of creditors — for example first-lien and second-lien lenders — that governs their relative rights in the shared collateral and in an enforcement or bankruptcy scenario. The borrower is typically a party but the substance is creditor-versus-creditor.
Key provisions: lien priority and payment waterfalls on collateral proceeds, standstill periods limiting when junior lenders can enforce, restrictions on junior creditors objecting to a DIP financing or 363 sale supported by seniors, buyout rights, and turnover obligations if juniors receive proceeds out of order.
Related documents include agreements among lenders (AALs) inside unitranche facilities (first-out/last-out mechanics) and subordination agreements for structurally or contractually subordinated debt. In restructurings, ICA terms often determine which creditor group controls the process.
Why interviewers ask
Restructuring and credit interviews reward candidates who understand that recoveries depend not just on leverage levels but on documentation — who has liens, who can enforce, and who is silenced in bankruptcy. ICAs are the answer to "what stops second-lien lenders from blowing up the process?"
Related terms
Interviews don't test definitions — they test recall under pressure.
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