DENMARK Law and Practice Contributed by: Morten Krogsgaard and Lennart Meyer Østenfjeld, Moalem Weitemeyer
Senior Lender Amendments An intercreditor agreement may also include promises from senior lenders not to make signifi- cant changes to, or grant waivers for, important matters in the senior finance documents without the junior lenders’ consent. Security Agent It is not unusual for the intercreditor agreement to also include the appointment of a security agent to represent all financiers in enforce- ment. The agreement outlines the enforcement process and restricts all lenders from seeking enforcement in their own right. See 5.2 Form Requirements . Limitation Language Subordination may constitute quasi security comprised in the Danish financial assistance regime and the limitation language is often drafted to comprise subordination obligations. See 5.5. Financial Assistance and 5.6 Other Restrictions . 4.2 Bank/Bond Deals In bank/bond structures, the bank often pro- vides a super-senior revolving credit facility. The assumed structure under the LMA standard form typically involves super-senior bank debt and bonds ranking pari passu regarding payment and the shared security package. The waterfall in this structure gives super-senior bank lenders priority in relation to the proceeds from the disposal or enforcement of security. However, it is not uncommon for transactions to deviate from the type assumed by the LMA documents. The super-senior lender will often negotiate alternative positions depending on the structure of the deal and the circumstances
Intercreditor agreements are often based on the LMA standard form, modified to fit the capital structure of the deal and simplified to reflect the simpler structures prevailing in the Danish mar- ket. In simpler transactions, a short-form subor- dination agreement is often used. A key purpose of the intercreditor agreement is to set out the position on: • priorities: the order of their claims and the distribution of repayment and security enforcement proceeds; • restrictions on junior lenders: including stand- still periods, limits on accepting payments (or payments above a certain threshold) and restrictions on amending the subordinated debt; and • turnover: establishing how the junior lender must return any payments received in viola- tion of the intercreditor agreement. Senior debt payments, including scheduled principal payments and voluntary or mandatory prepayments, are typically allowed according to the terms of the senior debt. Junior lenders are usually entitled to payments of interest, fees and indemnity payments but their rights to receive principal payments are restricted. Standstill One of the most important parts of an inter- creditor agreement is the standstill provision. This provision stops the junior lender from tak- ing action against the collateral after a default on the junior debt for a set period after inform- ing the senior lender. The standstill period gives the senior lender a specific time to evaluate and possibly enforce its rights against the collateral without interference from the junior lender.
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