Intercreditor Agreement Law and Legal Definition

An intercreditor agreement is an agreement among creditors that sets forth the various lien positions and the rights and liabilities of each creditor and its impact on the other creditors. Intercreditor agreements are often used financing companies and lenders to determine relative rights of multiple creditirs and establish priorities in payments and other issues. It is common for the intercreditor agreement to include buy-out rights that give the second lien lender the option to acquire, at par, the first lien lender’s claims and liens. That purchase option is typically triggered by specified events, such as the filing of a bankruptcy case by or against the borrower.