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An Intercreditor Deed is a crucial legal document that governs the relationships and priorities between multiple creditors who have provided different types of financing to the same borrower or group of borrowers. Under New Zealand law, this deed establishes clear hierarchies for payment distribution, enforcement rights, and security interests, ensuring that all parties understand their respective positions in the creditor structure. The document becomes essential when you have complex financing arrangements involving various classes of debt, each with different risk profiles and expected returns.

When do you need this document?

You need an Intercreditor Deed when your financing structure involves multiple creditors with different priority levels. This typically occurs in leveraged buyouts where senior bank debt combines with mezzanine financing, project finance transactions with multiple funding sources, or corporate restructuring scenarios involving new money alongside existing debt. The deed is also essential when you have working capital facilities operating alongside term debt, or when hedge counterparties provide derivative arrangements that need to rank appropriately with other creditors. In acquisition financing, you'll require this document to coordinate between acquisition debt, development finance, and potentially subordinated shareholder loans.

Key legal considerations

Priority ranking forms the cornerstone of any intercreditor arrangement, determining which creditors receive payment first upon enforcement or insolvency. You must carefully structure payment waterfall provisions that dictate how cash flows are distributed among different creditor classes during both normal operations and distress scenarios. Enforcement coordination clauses prevent junior creditors from taking independent action that could prejudice senior creditors' positions, while turnover provisions require junior creditors to transfer certain receipts to senior creditors. Standstill arrangements temporarily restrict junior creditors' enforcement rights, allowing senior creditors time to assess their options. Amendment and waiver provisions establish how changes to underlying loan agreements affect intercreditor arrangements, and information sharing protocols ensure all creditors receive appropriate updates about the borrower's financial condition.

Legal requirements in New Zealand

Under the Personal Property Securities Act 1999, you must ensure that security interest registrations properly reflect the agreed priority structure, as statutory priority rules may otherwise override contractual arrangements. The Companies Act 1993 requires compliance with charge registration requirements, particularly for security interests over company property. Your deed must account for the Insolvency Act 2006's provisions regarding preferential creditors and insolvent transactions, which can affect intercreditor arrangements during formal insolvency proceedings. The Contract and Commercial Law Act 2017 governs the fundamental validity and enforceability of your intercreditor provisions. Property Law Act 2007 requirements apply when your structure includes security over real estate, affecting both registration and enforcement procedures. The Receiverships Act 1993 becomes relevant for enforcement provisions, particularly regarding receiver appointment rights and powers that may vary between creditor classes.