Model Aba Intercreditor Agreement

When the second collateral market grew, the advisor to the first pawn lender devised various forms of substantially similar intercreditor agreements on the first pledge right/second pledge right. In the initial years of the second collateral market, the second collateral lender generally subordinated virtually all of its rights as a secured creditor to the rights of the first pledge creditor until the first pledge creditor was paid in full — the so-called „second silent“. Surprisingly, there were poorly published guidelines on the issues that consultants should consider when developing or revising an inter-credit agreement, and participants relied heavily on „market practices“. However, it gradually became apparent that the market had only limited experience of the effect of these provisions following a default by the borrower or the opening of bankruptcy proceedings. .