Subordination Agreements & Deeds of Priority

If you are lending money to a borrower who has or intends to take other money that is or will be secured over the same assets, you will want to make sure that your loan has the priority you have agreed upon. By putting a legal agreement or deed in place at the time the loan is taken out, you can be sure that, should the borrower end up in difficulties, your priority as a creditor is as intended.

We represent lenders in drawing up subordination agreements and deeds of priority to ensure their position is secure.

As a senior creditor, you will have the right to be repaid in full before subordinated debts are paid in the event of insolvency. As a borrower with financial problems is likely to be unable to satisfy all debts in full, securing a position as a priority debtor can be vital.

We advise mezzanine lenders on the terms of deeds of priority and understand the impact of sitting behind a senior lender.

We also advise borrowers on the terms of subordination agreements and deeds of priority to ensure that the implications of signing are fully understood.

Our team has an exceptionally strong commercial background, and we always ensure we fully understand your business before we draw up documents and advise you on entering into agreements. Our recommendations to you will be based on your long-term goals and we always ensure we are focused on the aims and ambitions you have for your organisation.

Subordination agreements

Where a business is borrowing funds from more than one source, a subordination agreement will clarify the order of repayment. If a director has loaned funds to their organisation and a commercial lender is also providing a loan, then a subordination agreement can be used to prioritise the commercial lender. The director can sign the agreement to confirm that they will not take funds to satisfy their debt until the loan from the commercial lender has been fully repaid.

Deeds of priority

If you are lending to a borrower who has or intends to take other lending that will also be secured over the same assets as you , we can draw up a deed of priority to ensure that your loan takes the priority you have agreed upon. This means that in the event only some of the loans can be repaid, yours will be ranked in the position stated in the deed of priority.

This can be crucial in ensuring that you recover the sum lent if the organisation enters into administration.