An inter creditor agreement (ICA) draft is a written agreement that outlines the rights and obligations of multiple creditors who have lent money to a single borrower. ICAs are often used in the lending industry to protect the interests of creditors when multiple lenders are involved in a loan transaction.
The purpose of an ICA is to ensure that all parties involved in a loan transaction are aware of their rights and obligations. The agreement provides a framework for how all parties will work together during the loan term, and how they will handle issues that may arise.
ICAs are typically complex documents that require careful drafting. The agreement must be specific to the transaction at hand, and must address the unique circumstances of the borrowers and creditors involved. As such, it is important to work with an experienced attorney who is familiar with drafting ICAs.
When drafting an ICA, there are several key provisions that must be included. These provisions should address issues such as priority of payments, collateral, lender rights, borrower obligations, and default provisions. Additionally, the agreement should spell out how disputes will be resolved and what happens in the event of bankruptcy or other financial challenges.
One key aspect of an ICA is the priority of payments provision. This provision outlines the order in which creditors will be repaid, and is critical in ensuring that creditors are able to recoup their investment. The priority of payments provision should be carefully crafted to ensure that all parties are treated fairly.
Another important provision in an ICA is the collateral provision. This provision outlines what assets are being used as collateral for the loan, and how they will be secured. This is critical in ensuring that the lenders are able to recoup their investment in the event of a borrower default.
Overall, an ICA is a complex agreement that requires careful consideration and drafting. It is essential to work with an experienced attorney who is familiar with the unique aspects of lending transactions and can help ensure that all parties are protected. By carefully drafting an ICA, lenders and borrowers alike can ensure that their rights are protected and that the transaction is successful.