Structure
Agreement among lenders (AAL)
The agreement among lenders is the private contract ranking your lenders against each other. You are barely a party to it, and it determines how easily you will get a waiver when you need one.
Also called intercreditor agreement · intercreditor · AAL · deed of priority · standstill
The voting schedule is the part that reaches you. What needs unanimity is what will be slow.
| Decision | Threshold |
|---|---|
| Administrative matters | Majority |
| Covenant waiver | Usually majority |
| Covenant level amendment | 30–55 on the scale |
| Releasing security | All lenders |
| Maturity, margin, principal | All lenders |
Published: bank club agreements define which decisions need every lender and which need a majority, commonly two thirds by commitment.
What the agreement is for
Where more than one lender is involved, the facility agreement says what the borrower owes. The agreement among lenders says how those lenders rank against each other, who may act, and who gets paid in what order if things go wrong.
It goes by several names depending on the structure. In a unitranche deal with a bank revolver it is usually called an agreement among lenders. In a layered bank structure with senior and mezzanine tranches it is an intercreditor agreement. Where the arrangement is simpler, a deed of priority does similar work in fewer pages.
In all of them the borrower is barely a party. You sign, you are bound by parts of it, and the substance is a negotiation between lenders about each other. That is a reasonable arrangement and it has one consequence worth understanding: nobody in that negotiation is representing your interests.
The voting schedule, and why it reaches you
This is the part of the agreement that touches a borrower most often, and it is the part most worth reading.
The schedule defines which decisions need every lender and which need a majority, commonly two thirds by commitment. That schedule determines how easily you get a waiver or a consent later, which is a live question for any business that will want to do something not contemplated at signing.
The pattern is fairly consistent. Administrative matters and most waivers sit in majority territory. Amendments to covenant levels usually do too. But the fundamental terms, releasing security, extending maturity, reducing the margin or the principal, normally require every lender to agree. A single dissenting lender can block those, and on a facility with several participants that is a real risk rather than a theoretical one.
The borrower-side move is to push routine matters into majority territory. It costs the lenders little and it is the difference between a consent that takes two weeks and one that takes two months.
A standstill buys the senior lender time. The junior lender waits, and so does any solution that needs them.
| Default type | Standstill |
|---|---|
| Payment default | ~90 days |
| Financial covenant | ~120 days |
| Other defaults | ~180 days |
Illustrative standstill periods by claim type. No guide publishes these, so they are stated as market convention rather than measured data.
Ranking and the payment waterfall
The agreement allocates the proceeds of shared security. In a typical unitranche structure that means enforcement costs first, then the super senior revolving facility in full, then the unitranche, then any junior layer, with shareholders last.
The ranking is contractual rather than proprietary. Both lenders usually share one security package, a debenture and a share charge, held by a common security agent for them together. Nothing on the Companies House file discloses who ranks where; the register shows a charge held by an agent and the priority lives in the private agreement.
Two things follow. A borrower reading their own charge register cannot see the structure, and a prospective new lender cannot either, which is one reason a refinancing involves a request for the intercreditor rather than reliance on public records.
Standstills
A standstill prevents a junior lender from enforcing for a defined period after a default, giving the senior lender time to work the situation out without a junior creditor forcing a value-destroying outcome.
Periods vary by default type and are graded by seriousness. A payment default carries the shortest wait, commonly around ninety days. A financial covenant breach runs longer, often around one hundred and twenty. Other defaults are longer still, commonly up to around one hundred and eighty days. The senior lender may act throughout.
For a borrower the standstill cuts both ways. It stops a junior lender acting precipitately, which is helpful. But it also means that during a difficult period the junior lender is frozen, and any solution requiring their agreement, a waiver, an amendment, new money, is being negotiated with a party who has no ability to act and correspondingly little reason to be accommodating.
Who controls enforcement
Normally the senior or super senior lender, acting through the security agent. The agreement designates an instructing group, and the junior lenders follow rather than lead.
The provisions that matter here are the ones governing what the controlling lender must do with the proceeds and how quickly they must act. A junior lender will usually negotiate a right to be consulted, a requirement that any sale be at fair value or conducted through a defined process, and sometimes a right to purchase the senior debt at par before enforcement proceeds.
That last mechanism, the buy-out right, occasionally matters to a borrower. A junior lender who buys out the senior debt becomes the single lender across the structure, which can simplify a restructuring considerably, though it happens rarely at £3-15m.
You are barely a party to it, but four provisions reach into your daily life. Ask for those.
| Provision | Influence |
|---|---|
| Ranking between lenders | Closed |
| Enforcement proceeds | Closed |
| Standstill lengths | 28–50 on the scale |
| Super senior cap headroom | 50–75 on the scale |
| Voting schedule | Push here |
Relative influence a borrower typically has over each provision. Illustrative, not measured data.
Turnover and payment blockage
Two mechanics that constrain what the borrower may pay and when.
A payment blockage prevents the borrower paying junior lenders while a senior default subsists. That is straightforward in principle and awkward in practice: a business in a covenant discussion with its senior lender may be contractually barred from paying interest on its junior debt, which then triggers a default under the junior facility, which cross-defaults.
Turnover requires any junior lender who does receive a payment they were not entitled to, to hand it over to the senior lender. It is a backstop rather than a live provision, but it means a junior creditor cannot improve their position by being paid out of turn.
For a borrower the practical point is to understand which payments are blocked in which circumstances, because the blockage operates automatically rather than on anyone's decision, and discovering it mid-crisis is worse than knowing in advance.
When the negotiation delays a deal
Frequently, and later than anyone plans for. The intercreditor is usually negotiated after the facility terms are agreed, between lenders who have no shared timetable and whose lawyers are working to their own queues.
It is also the document where a lender who is not gaining anything from the transaction has the most leverage. On a refinancing where an existing bank stays in place as the revolver provider alongside a new fund, that bank is being asked to agree terms with a lender they did not choose, and they have little incentive to hurry.
The way to protect the timetable is to ask for the intercreditor principles at term-sheet stage, not the full draft but the key terms: the super senior cap, the voting thresholds, the standstill lengths. Getting those agreed in principle before exclusivity is granted removes the most common late-stage delay from a multi-lender structure.
What a borrower should ask for
Four things, in order of value.
The voting schedule, with as many routine matters as possible in majority rather than unanimity territory. Headroom in the super senior cap so a growing business can increase its working capital line without seeking consent from a lender who gains nothing by giving it. Clarity on whether the revolver can be pulled while the term debt is performing. And the ability to see the agreement and the timetable for negotiating it.
What will not move is the ranking itself, or the allocation of enforcement proceeds. Those are matters between the lenders, and a borrower pressing on them is spending credibility on something they were never going to win.
Common questions
What is an agreement among lenders?
The private contract ranking your lenders against each other, governing who may act, who gets paid in what order, and what level of consent each decision needs. In a unitranche deal with a bank revolver it is usually called an agreement among lenders; in a layered bank structure it is an intercreditor agreement.
Am I a party to the intercreditor agreement?
Barely. You sign and are bound by parts of it, but the substance is a negotiation between lenders about each other. The practical consequence is that nobody in that negotiation is representing your interests, so the provisions that affect you need raising by you.
What voting threshold do lender decisions need?
It depends on the decision. Administrative matters and most waivers usually need a majority, commonly two thirds by commitment. Fundamental terms — releasing security, extending maturity, reducing the margin or principal — normally require every lender to agree, so a single dissenting lender can block them.
Why does the voting schedule matter to a borrower?
Because it determines how easily you get a waiver or a consent later. Pushing routine matters into majority territory costs the lenders little and is the difference between a consent that takes two weeks and one that takes two months. It is the single most useful thing a borrower can ask for in an intercreditor.
What is a standstill period?
A period after a default during which a junior lender may not enforce, giving the senior lender room to work the situation out. Periods are graded by seriousness: commonly around ninety days for a payment default, around one hundred and twenty for a covenant breach, and up to around one hundred and eighty for other defaults.
Who controls enforcement if things go wrong?
Normally the senior or super senior lender, acting through the security agent, with junior lenders following rather than leading. Junior lenders usually negotiate a right to be consulted, a fair-value requirement on any sale, and sometimes a right to buy out the senior debt at par before enforcement proceeds.
Can I be stopped from paying my junior lender?
Yes. A payment blockage prevents payments to junior lenders while a senior default subsists, and it operates automatically rather than on anyone's decision. That can trigger a default under the junior facility, which then cross-defaults, so knowing which payments are blocked in which circumstances before a crisis is worth the reading time.
Why does the intercreditor delay deals?
Because it is usually negotiated after the facility terms, between lenders with no shared timetable, and it is the document where a lender who gains nothing from the transaction has the most leverage. Ask for the intercreditor principles — super senior cap, voting thresholds, standstill lengths — at term-sheet stage rather than waiting for the first draft.
The full treatment sits in the guide: unitranche vs bank senior.
Related terms
This page explains a term as it is used in the UK lower-mid-market. It is general information, not advice on any particular facility. Terms vary between lenders and between deals, and the drafting in your own agreement governs.