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An update on second-lien financings and intercreditor agreements ...

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An update on second-lien financings and intercreditor agreements ...

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Ajouté le : 21 juillet 2011
Lecture(s) : 76
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May 6, 2011
An update on second-lien financings and intercreditor
agreements: Part III
This alert presents the latest in a series of articles and a handbook about second-lien financings and
intercreditor agreements co-authored by Mark N. Berman, a partner resident in our New York City
and Boston offices, and Jo Ann Brighton, a former Nixon Peabody partner, now a partner at K&L
Gates LLP resident in its Charlotte, NC and New York City offices. It is reprinted with permission
from the
ABI Journal
, Volume XXX, No. 2, March, 2011. This article discusses two non-bankruptcy
court decisions that examined mezzanine loan intercreditor agreements and also looks at the
jurisdictional issues present when a bankruptcy court considers whether it has jurisdiction to
enforce an intercreditor agreement.
Non-bankruptcy courts and intercreditor agreements
Mezzanine financing of real estate context
Second lien financings are not the only financing context in which you will find an Intercreditor or
Subordination Agreement. They are also used to define the relative rights of lenders in real estate
financing transactions where the ‘senior’ lender is lending to a borrower that owns the key real
property that will secure the loan while a separate ‘mezzanine’ or ‘junior’ loan is made to the equity
interest holder secured by the equity in the borrower. We now look at some noteworthy
intercreditor/subordination decisions issued by non-bankruptcy courts in the context of a troubled
real estate project.
PSW
In the
PSW
case,
1
Bank of America, the senior secured lender, was granted judgment by a state
court declaring that the Intercreditor Agreement prevented PSW, the mezzanine lender, from
1
Bank of America N.A. v. PSW NYC LLC
, 2010 WF 4243437 (N.Y. Sup. Ct. September 15, 2010)
(unreported).
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