Structuring Intercreditor Agreements in Split Collateral Lien Structures Between ABL and Term Lenders

Navigating Collateral Pool, Priority of Rights, Access to Collateral, Standstill Period, and Waterfall Provisions

Recording of a 90-minute CLE webinar with Q&A


Conducted on Thursday, April 6, 2017
Recorded event now available


This CLE webinar will provide commercial lending counsel with a review of key provisions in a split-collateral intercreditor arrangement, including, among other things, priority of rights, access to collateral and standstill provisions. The panel will address the negotiation of provisions from the perspective of the asset-based lender (ABL) and term lender.

Description

In the current market, financing arrangements often contain multiple tranches of debt which are accompanied by complex intercreditor arrangements, and split collateral arrangements are more popular. With increasingly common complex split collateral intercreditor arrangements, and increasingly common built-in flexibility in loan documents to accommodate additional debt and liens in a variety of structures on a post-closing basis, lenders must have a firm grasp of the considerations involved in split collateral intercreditor arrangements.

In a split collateral structure, the ABL lender receives a first lien on the working capital assets—typically receivables, inventory and related proceeds—and the term lender receives a first lien on the remaining assets. Each lender also often receives a junior lien on the other lender’s pool of collateral.

Listen as our authoritative panel of commercial finance practitioners analyzes key provisions in a split collateral intercreditor arrangement from the perspectives of both the ABL and the term lender. The panel will discuss key provisions, including, among other things, priority of rights, access to collateral and standstill provisions.

Outline

  1. Defining collateral pools
  2. Priority of rights issues
  3. Access to collateral, including license rights relative to intellectual property
  4. Standstill and the lienholders’ right to exercise remedies
  5. Waterfall provisions

Benefits

The panel will review these and other key issues:

  • Collateral pools of the lenders
  • Priority rights to proceeds from collateral or other receipts not allocated to either lender
  • Access rights and license rights
  • Standstill provisions
  • Each lender’s rights and remedies following a borrower default

Faculty

Katherine E. Bell, Partner
Paul Hastings, Costa Mesa, Calif.

Ms. Bell's practice focuses on commercial and corporate finance transactions. She regularly represents commercial banks, investment banks, finance companies, other lenders, and borrowers in working capital facilities (cash flow and asset-based), acquisition financings, structured financings, and other leveraged finance transactions including leveraged buyouts, restructurings, and recapitalizations. She has significant experience negotiating intercreditor relationships, including 1st Lien/2nd Lien transactions, split collateral arrangements, and unitranche “A/B” transactions.

Peter S. Burke, Partner
Paul Hastings, Los Angeles

Mr. Burke works in the firm's Finance and Restructuring Group and his practice focuses on commercial and corporate finance, asset-based lending, subordinated debt financings and other lending transactions. He represents numerous banks, finance companies, hedge funds and other lenders in establishing credit facilities for acquisitions, recapitalizations, restructurings and working capital facilities.

Jennifer St. John Yount, Partner, Chair of Finance and Restructuring
Paul Hastings, Los Angeles

Ms. Yount’s practice consists of representing banks, finance companies, and other lenders in working capital financings, acquisition financings, bank/bond transactions, restructurings, and debtor in-possession and exit financings. Ms. Yount has negotiated numerous intercreditor and subordination agreements in 1st Lien/2nd Lien, split collateral, and mezzanine financings and agreements among lenders in unitranche and FILO financings.


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Thompson Hine

Mark N. Berman

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Northeastern University

Willa Cohen Bruckner

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Alston & Bird

Lawrence Kaplan

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