A properly drafted intercreditor agreement could have possibly avoided the intercreditor disputes that arose in the RadioShack and MPM Silicones cases. However, as usual, the devil is in the details — as these cases reveal, if not properly drafted, an intercreditor agreement may not provide the protection creditors desire, but rather, only serve to increase, not lessen, intercreditor conflict.
In order to avoid future intercreditor disputes, investors can learn from past mistakes and draft or revise their intercreditor agreements accordingly. In this Client Alert, we attempt to highlight a number of specific considerations that may improve intercreditor agreements, to better achieve their intended purpose of delineating the respective priorities and rights of senior and junior secured creditors while avoiding intercreditor conflict.
