Model Intercreditor Agreement (Among A Lenders, B Lenders, and Swap Provider)

Because a commercial real estate borrower usually wants to secure a mortgage loan for as much as possible, as inexpensively as possible, loan originators sometimes structure a single large loan as two smaller loans by means of an intercreditor agreement. The process of severing one loan into separate interests amounts to a mini-securitization. Using an intercreditor agreement enables the loan originator to deliver more financing at a lower all-in cost to a borrower than otherwise possible. This article explains why and how breaking one loan into an “A” loan and a “B” loan can become a complex transaction, and offers a model agreement in plain English that seeks to summarize normal industry expectations