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Are Intercreditor Agreements Now Going According to Plan?

Intercreditor agreements are of greater importance given today's active secondary loan market, which clears a path for the debtor's original relationship lenders to sell their interests should a restructuring loom. Distressed debt purchasers, on the other hand, may have different objectives that make them less willing to join forces with longer-term holders.

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Intercreditor agreements should add consensus and cohesion to the bankruptcy process. They provide a framework to align creditors with often directly conflicting interests, before those interests are tested under the duress of a restructuring or liquidation. And this opportunity for pre-restructuring alignment is of greater importance given today’s active secondary loan market, which clears a path for the debtor’s original relationship lenders to sell their interests should a restructuring loom. Distressed debt purchasers, on the other hand, may have different objectives that make them less willing to join forces with longer-term holders.

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