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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• Arts

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• Publié par: ecomejex
• Nombre de lectures: 77
• Langue: English

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1

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,

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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

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Bank of America N.A. v. PSW NYC LLC

, 2010 WF 4243437 (N.Y. Sup. Ct. September 15, 2010)

(unreported).