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Free UK Inter-Creditor / Subordination Agreement Template
An Inter-Creditor Agreement governs the relationship between two or more lenders to the same borrower — typically a Senior Lender (bank or institutional senior debt) and a Junior Lender (mezzanine, subordinated loan or shareholder loan). It sets out who gets paid first in good times and bad, who controls enforcement following default, and the contractual subordination that makes multi-tranche financing possible. Use our free UK template, modelled on LMA market standards, to author a fully-featured agreement in minutes — typically a £500+ purchase from Practical Law or available only to LMA members.
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INTER-CREDITOR AGREEMENT
Senior · Junior · Borrower · Executed As A Deed · England And Wales · 2026-05-20
SENIOR LENDER
Aldgate Senior Lending Partners LLP
1 Aldgate, London, EC3N 1AB
Companies House No. OC400123
Companies House No. OC400123
By: David Marlow, Partner
JUNIOR LENDER
Sycamore Mezzanine Fund III LP
c/o Sycamore Capital, 35 Marylebone High Street, London, W1U 4QA
Companies House No. LP022456
Companies House No. LP022456
By: Rebecca Cole, Managing Partner
BORROWER
Northwood Industries Ltd
Northwood House, Brunel Way, Slough, SL1 4QE
Companies House No. 08765432
Companies House No. 08765432
By: Marcus Henley, Chief Financial Officer
GROUP GUARANTOR
Northwood Holdings Ltd
Northwood House, Brunel Way, Slough, SL1 4QE
Companies House No. 08765431
Companies House No. 08765431
By: Authorised Signatory
Senior £18,000,000 · Junior £6,500,000
Borrower: Northwood Industries Ltd
This Inter-Creditor Agreement (the "Agreement") is made on 2026-05-20 between Aldgate Senior Lending Partners LLP (Companies House No. OC400123) of 1 Aldgate, London, EC3N 1AB (the "Senior Lender"), Sycamore Mezzanine Fund III LP (Companies House No. LP022456) of c/o Sycamore Capital, 35 Marylebone High Street, London, W1U 4QA (the "Junior Lender"), and Northwood Industries Ltd (Companies House No. 08765432) of Northwood House, Brunel Way, Slough, SL1 4QE (the "Borrower") and Northwood Holdings Ltd of Northwood House, Brunel Way, Slough, SL1 4QE (the "Group Guarantor"). The Senior Lender has provided (or has agreed to provide) to the Borrower senior debt finance under the Senior Facility Agreement dated 2026-05-20; the Junior Lender has provided (or agreed to provide) junior / subordinated debt finance under the Junior Facility Agreement dated 2026-05-20. This Agreement sets out the relative ranking, payment priority, enforcement coordination and amendment rules between the Senior Lender and the Junior Lender in relation to the debts owed by the Borrower (and, where applicable, the Group Guarantor). This Agreement is executed as a deed under section 1 of the Law of Property (Miscellaneous Provisions) Act 1989 and (where a party is a company) section 46 of the Companies Act 2006, taking advantage of the twelve-year limitation period in section 8 of the Limitation Act 1980.
1.
DEFINITIONS AND INTERPRETATION
In this Agreement, unless the context otherwise requires:
"Business Day" means any day other than a Saturday, Sunday or public holiday in England and Wales.
"Group" means the Borrower, the Group Guarantor (if any) and each of their respective subsidiary undertakings from time to time (within the meaning of section 1162 of the Companies Act 2006).
"Insolvency Event" means, in relation to any party, the passing of a resolution for winding up; the presentation of an unstayed winding-up petition; entry into administration; appointment of a receiver, administrative receiver, administrator or liquidator; entry into a Company Voluntary Arrangement under Part I of the Insolvency Act 1986; inability to pay debts within the meaning of section 123 of that Act; or any analogous process in any jurisdiction.
"Junior Debt" means all present and future monies, obligations and liabilities (whether actual or contingent and whether owed in any capacity) of the Borrower (or any Group member) to the Junior Lender under or in connection with the Junior Facility Agreement — including principal, interest, capitalised interest, fees, indemnities, costs and expenses.
"Junior Facility Agreement" means the Mezzanine facility agreement dated 2026-05-20 between the Junior Lender and the Borrower in the principal amount of £6,500,000 maturing on 2032-11-20.
"Senior Debt" means all present and future monies, obligations and liabilities (whether actual or contingent and whether owed in any capacity) of the Borrower (or any Group member) to the Senior Lender under or in connection with the Senior Facility Agreement.
"Senior Facility Agreement" means the Term loan and revolving credit facility agreement dated 2026-05-20 between the Senior Lender and the Borrower in the principal amount of £18,000,000 maturing on 2031-05-20.
"Senior Discharge Date" means the date on which all Senior Debt is irrevocably and unconditionally discharged in full (and all commitments under the Senior Facility Agreement are cancelled and no further advance can be made).
References to statutes are to those statutes as amended, extended, re-enacted or replaced from time to time, and include any statutory instrument or regulation made under them. Headings are for convenience only and do not affect interpretation.
"Business Day" means any day other than a Saturday, Sunday or public holiday in England and Wales.
"Group" means the Borrower, the Group Guarantor (if any) and each of their respective subsidiary undertakings from time to time (within the meaning of section 1162 of the Companies Act 2006).
"Insolvency Event" means, in relation to any party, the passing of a resolution for winding up; the presentation of an unstayed winding-up petition; entry into administration; appointment of a receiver, administrative receiver, administrator or liquidator; entry into a Company Voluntary Arrangement under Part I of the Insolvency Act 1986; inability to pay debts within the meaning of section 123 of that Act; or any analogous process in any jurisdiction.
"Junior Debt" means all present and future monies, obligations and liabilities (whether actual or contingent and whether owed in any capacity) of the Borrower (or any Group member) to the Junior Lender under or in connection with the Junior Facility Agreement — including principal, interest, capitalised interest, fees, indemnities, costs and expenses.
"Junior Facility Agreement" means the Mezzanine facility agreement dated 2026-05-20 between the Junior Lender and the Borrower in the principal amount of £6,500,000 maturing on 2032-11-20.
"Senior Debt" means all present and future monies, obligations and liabilities (whether actual or contingent and whether owed in any capacity) of the Borrower (or any Group member) to the Senior Lender under or in connection with the Senior Facility Agreement.
"Senior Facility Agreement" means the Term loan and revolving credit facility agreement dated 2026-05-20 between the Senior Lender and the Borrower in the principal amount of £18,000,000 maturing on 2031-05-20.
"Senior Discharge Date" means the date on which all Senior Debt is irrevocably and unconditionally discharged in full (and all commitments under the Senior Facility Agreement are cancelled and no further advance can be made).
References to statutes are to those statutes as amended, extended, re-enacted or replaced from time to time, and include any statutory instrument or regulation made under them. Headings are for convenience only and do not affect interpretation.
2.
RANKING AND SUBORDINATION
2.1 Subordination basis. Subordination plus security priority. The Junior Debt ranks behind the Senior Debt in right of payment and in priority of security. Where the Senior Lender and the Junior Lender hold security over the same assets, the Junior Lender's security ranks junior to the Senior Lender's security regardless of date of registration or the order of perfection. The parties agree that this contractual ordering prevails over any priority that may otherwise arise under the registration regime in sections 859A-Q of the Companies Act 2006 or under the Law of Property Act 1925.
2.2 Security. The Senior Lender and the Junior Lender share the same security package over the assets of the Borrower and Group security providers, but the Junior Lender's rights of enforcement and recovery are subordinated to the Senior Lender's.
2.3 No principal repayment to Junior. The Borrower shall not make any payment of principal to the Junior Lender on account of the Junior Debt before the Senior Discharge Date, except as expressly permitted under clause 5 (Permitted Payments). Any prepayment, principal amortisation or capital reduction of the Junior Debt is prohibited save with the prior written consent of the Senior Lender.
2.4 Re Maxwell Communications. The parties intend that this subordination be effective in insolvency consistently with Re Maxwell Communications Corporation plc (No 2) [1993] BCLC 1200, and shall remain effective notwithstanding any liquidation, administration, Company Voluntary Arrangement or other Insolvency Event.
2.2 Security. The Senior Lender and the Junior Lender share the same security package over the assets of the Borrower and Group security providers, but the Junior Lender's rights of enforcement and recovery are subordinated to the Senior Lender's.
2.3 No principal repayment to Junior. The Borrower shall not make any payment of principal to the Junior Lender on account of the Junior Debt before the Senior Discharge Date, except as expressly permitted under clause 5 (Permitted Payments). Any prepayment, principal amortisation or capital reduction of the Junior Debt is prohibited save with the prior written consent of the Senior Lender.
2.4 Re Maxwell Communications. The parties intend that this subordination be effective in insolvency consistently with Re Maxwell Communications Corporation plc (No 2) [1993] BCLC 1200, and shall remain effective notwithstanding any liquidation, administration, Company Voluntary Arrangement or other Insolvency Event.
3.
GOVERNING LAW AND JURISDICTION
This Agreement and any dispute or claim (including non-contractual disputes) arising out of or in connection with it shall be governed by and construed in accordance with the laws of England and Wales. The parties irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any such dispute or claim.
4.
PAYMENT WATERFALL
4.1 Order of distribution. After acceleration of the Senior Debt or any Insolvency Event of the Borrower, all monies received by either Lender from the Borrower (or any Group member) or from realisation of security shall be applied in the following order (the "Waterfall"):
(a) first, in payment of the agent / security trustee fees, costs, charges and expenses (including legal and enforcement costs) properly incurred on a senior basis;
(b) secondly, in payment of all amounts due and unpaid to the Senior Lender in respect of fees, costs, indemnities, recovery costs and other agent reimbursements;
(c) thirdly, in payment of all accrued unpaid interest (including default interest) on the Senior Debt;
(d) fourthly, in repayment of principal of the Senior Debt (in such order as the Senior Facility Agreement provides), until the Senior Discharge Date;
(e) fifthly, in payment of the "Prescribed Part" under section 176A of the Insolvency Act 1986 (currently capped at £800,000 by the Insolvency Act 1986 (Prescribed Part) (Amendment) Order 2020) to unsecured creditors generally, where applicable in a Borrower administration / liquidation;
(f) sixthly, in payment of all amounts due and unpaid to the Junior Lender in respect of fees, costs, indemnities and recovery costs;
(g) seventhly, in payment of all accrued unpaid interest (including default interest and PIK interest) on the Junior Debt;
(h) eighthly, in repayment of principal of the Junior Debt; and
(i) ninthly, the surplus (if any) to the Borrower or as the Borrower may direct.
(a) first, in payment of the agent / security trustee fees, costs, charges and expenses (including legal and enforcement costs) properly incurred on a senior basis;
(b) secondly, in payment of all amounts due and unpaid to the Senior Lender in respect of fees, costs, indemnities, recovery costs and other agent reimbursements;
(c) thirdly, in payment of all accrued unpaid interest (including default interest) on the Senior Debt;
(d) fourthly, in repayment of principal of the Senior Debt (in such order as the Senior Facility Agreement provides), until the Senior Discharge Date;
(e) fifthly, in payment of the "Prescribed Part" under section 176A of the Insolvency Act 1986 (currently capped at £800,000 by the Insolvency Act 1986 (Prescribed Part) (Amendment) Order 2020) to unsecured creditors generally, where applicable in a Borrower administration / liquidation;
(f) sixthly, in payment of all amounts due and unpaid to the Junior Lender in respect of fees, costs, indemnities and recovery costs;
(g) seventhly, in payment of all accrued unpaid interest (including default interest and PIK interest) on the Junior Debt;
(h) eighthly, in repayment of principal of the Junior Debt; and
(i) ninthly, the surplus (if any) to the Borrower or as the Borrower may direct.
5.
STANDSTILL AND PERMITTED PAYMENTS
5.1 Standstill on Junior enforcement. Following any Senior Default that has not been waived, the Junior Lender shall not (without the prior written consent of the Senior Lender) take any Enforcement Action in respect of the Junior Debt for a period of 12 months from the date of the Senior Default (the "Standstill Period"). "Enforcement Action" includes (a) acceleration of the Junior Debt; (b) demand for payment; (c) enforcement of any security; (d) appointment of a receiver, administrator, liquidator or analogous officer; (e) commencement of any winding-up petition; (f) suing for or recovering any sum from the Borrower; and (g) any set-off (save to the extent expressly permitted).
5.2 Extensions. The Senior Lender may extend the Standstill Period by a further six (6) months on payment to the Junior Lender of an extension fee equal to one percent (1%) of the outstanding Junior Debt.
5.3 Permitted Payments. Notwithstanding the standstill, the following payments may be made to the Junior Lender:
(a) Interest. Subject to no continuing Senior Default, the Borrower may pay scheduled cash interest to the Junior Lender at the contractual rate set out in the Junior Facility Agreement. Default interest, PIK interest and any catch-up payments shall not be made before the Senior Discharge Date.
(b) Principal. No principal payments shall be made to the Junior Lender before the Senior Discharge Date.
(c) Fees and expenses. Reasonable agency / commitment fees and reimbursable out-of-pocket expenses payable under the Junior Facility Agreement may be paid in the ordinary course unless a Senior Default has been declared and notified to the Junior Lender.
5.4 Cure rights. If a Senior Default occurs, the Junior Lender may (without obligation) cure the default by paying the Senior Lender, within ten (10) Business Days, the amount required to bring the Senior Debt into good standing. Cure rights are subject to an aggregate cap of £2,000,000 and a per-cure-event cap of one-quarter of that amount. The Junior Lender may exercise cure rights no more than four (4) times during the life of the Senior Facility.
5.2 Extensions. The Senior Lender may extend the Standstill Period by a further six (6) months on payment to the Junior Lender of an extension fee equal to one percent (1%) of the outstanding Junior Debt.
5.3 Permitted Payments. Notwithstanding the standstill, the following payments may be made to the Junior Lender:
(a) Interest. Subject to no continuing Senior Default, the Borrower may pay scheduled cash interest to the Junior Lender at the contractual rate set out in the Junior Facility Agreement. Default interest, PIK interest and any catch-up payments shall not be made before the Senior Discharge Date.
(b) Principal. No principal payments shall be made to the Junior Lender before the Senior Discharge Date.
(c) Fees and expenses. Reasonable agency / commitment fees and reimbursable out-of-pocket expenses payable under the Junior Facility Agreement may be paid in the ordinary course unless a Senior Default has been declared and notified to the Junior Lender.
5.4 Cure rights. If a Senior Default occurs, the Junior Lender may (without obligation) cure the default by paying the Senior Lender, within ten (10) Business Days, the amount required to bring the Senior Debt into good standing. Cure rights are subject to an aggregate cap of £2,000,000 and a per-cure-event cap of one-quarter of that amount. The Junior Lender may exercise cure rights no more than four (4) times during the life of the Senior Facility.
6.
ENFORCEMENT COORDINATION AND TURNOVER
6.1 Senior-led enforcement with consultation. The Senior Lender shall lead all enforcement following a Senior Default. The Senior Lender shall consult the Junior Lender on (a) the choice of insolvency process; (b) any settlement / compromise of more than 25% of the Senior Debt; (c) sale of all or substantially all the Group's business. The Senior Lender shall not be bound by the Junior Lender's view but shall act in good faith having regard to it.
6.2 Enforcement consent threshold. The Senior Lender alone shall decide all aspects of enforcement strategy following a Senior Default.
6.3 Turnover. If, after a Senior Default and before the Senior Discharge Date, the Junior Lender receives any payment, distribution or recovery from the Borrower or any Group member (whether by direct payment, set-off, security realisation, dividend in insolvency or otherwise) other than a Permitted Payment, the Junior Lender shall (a) hold that receipt on trust for the Senior Lender; (b) notify the Senior Lender within 10 Business Days; and (c) pay it to the Senior Lender (or its nominated agent / trustee) within 10 Business Days of receipt.
6.4 Enforcement proceeds on trust. All proceeds of enforcement of any security held by either Lender shall be received by the security trustee (or the enforcing Lender, where no trustee is appointed) on trust for distribution under the Waterfall in clause 4. The enforcing Lender shall hold such proceeds in a designated trust account until distribution.
6.2 Enforcement consent threshold. The Senior Lender alone shall decide all aspects of enforcement strategy following a Senior Default.
6.3 Turnover. If, after a Senior Default and before the Senior Discharge Date, the Junior Lender receives any payment, distribution or recovery from the Borrower or any Group member (whether by direct payment, set-off, security realisation, dividend in insolvency or otherwise) other than a Permitted Payment, the Junior Lender shall (a) hold that receipt on trust for the Senior Lender; (b) notify the Senior Lender within 10 Business Days; and (c) pay it to the Senior Lender (or its nominated agent / trustee) within 10 Business Days of receipt.
6.4 Enforcement proceeds on trust. All proceeds of enforcement of any security held by either Lender shall be received by the security trustee (or the enforcing Lender, where no trustee is appointed) on trust for distribution under the Waterfall in clause 4. The enforcing Lender shall hold such proceeds in a designated trust account until distribution.
7.
AMENDMENT LOCKS AND REFINANCING
7.1 Material Junior amendments. Any Material Amendment to the Junior Facility Agreement shall require the prior written consent of the Senior Lender. Non-material amendments may be made without consent on at least ten (10) Business Days' notice to the Senior Lender.
7.2 Material Amendment definition. "Material Amendment" means any amendment that (a) extends the maturity date of the Junior Debt beyond the Senior Debt; (b) increases the principal amount of the Junior Debt; (c) increases the interest rate above the contractual rate; (d) introduces new security or new cross-default triggers; (e) changes the priority of the Junior Debt; or (f) introduces any additional financial covenant.
7.3 Senior facility amendments. The Senior Lender may amend the Senior Facility Agreement without the Junior Lender's consent, save that the following changes require Junior Lender consent: (a) extension of Senior Debt maturity beyond Junior Debt maturity; (b) increase in Senior Debt principal by more than twenty-five percent (25%); (c) increase in cash interest rate by more than two percentage points; (d) introduction of new security materially adverse to the Junior Lender.
7.4 Senior refinancing protection. The Senior Lender may refinance the Senior Facility Agreement with a new senior facility on substantially similar terms (the "Replacement Senior Facility") without the Junior Lender's consent, provided that the Replacement Senior Facility (a) does not exceed the principal amount and undrawn commitments of the Senior Debt at the date of refinancing; (b) does not have a maturity later than the original Senior Debt maturity by more than twelve (12) months; and (c) does not impose materially more adverse terms on the Junior Lender. The Junior Lender shall execute all documents reasonably required to confirm the application of this Agreement to the Replacement Senior Facility.
7.2 Material Amendment definition. "Material Amendment" means any amendment that (a) extends the maturity date of the Junior Debt beyond the Senior Debt; (b) increases the principal amount of the Junior Debt; (c) increases the interest rate above the contractual rate; (d) introduces new security or new cross-default triggers; (e) changes the priority of the Junior Debt; or (f) introduces any additional financial covenant.
7.3 Senior facility amendments. The Senior Lender may amend the Senior Facility Agreement without the Junior Lender's consent, save that the following changes require Junior Lender consent: (a) extension of Senior Debt maturity beyond Junior Debt maturity; (b) increase in Senior Debt principal by more than twenty-five percent (25%); (c) increase in cash interest rate by more than two percentage points; (d) introduction of new security materially adverse to the Junior Lender.
7.4 Senior refinancing protection. The Senior Lender may refinance the Senior Facility Agreement with a new senior facility on substantially similar terms (the "Replacement Senior Facility") without the Junior Lender's consent, provided that the Replacement Senior Facility (a) does not exceed the principal amount and undrawn commitments of the Senior Debt at the date of refinancing; (b) does not have a maturity later than the original Senior Debt maturity by more than twelve (12) months; and (c) does not impose materially more adverse terms on the Junior Lender. The Junior Lender shall execute all documents reasonably required to confirm the application of this Agreement to the Replacement Senior Facility.
8.
ACCELERATION, INSOLVENCY AND GENERAL
8.1 Cross-acceleration with grace period. Acceleration of the Senior Debt shall, after a grace period of thirty (30) days from notice of acceleration, constitute an Event of Default under the Junior Facility Agreement entitling the Junior Lender to accelerate the Junior Debt (subject to clause 5 (Standstill)). During the grace period the parties may negotiate a workout.
8.2 Insolvency cooperation — information only. In any Insolvency Event of the Borrower or Group Guarantor, the Senior Lender shall keep the Junior Lender reasonably informed of the conduct of the insolvency and the Senior Lender's voting intentions, but shall vote its own debt as it sees fit subject to the contractual obligations in this Agreement (including turnover).
8.3 Ipso facto protection. The parties acknowledge section 233B of the Insolvency Act 1986 (as inserted by the Corporate Insolvency and Governance Act 2020), which restricts a supplier's right to terminate or vary "essential supplies" by reason solely of the customer's insolvency. Nothing in this Agreement shall be construed as a contractual right inconsistent with that statutory regime where it applies to either Lender.
8.4 Reservation of rights. No failure or delay by any Lender in exercising any right under this Agreement shall operate as a waiver of that right, nor shall any partial exercise preclude further exercise. Rights under this Agreement are cumulative and not exclusive of any rights provided by law.
8.5 Sanctions and AML. Each party warrants that it is not, and to the best of its knowledge no member of its group is, subject to any UK, EU, US or UN sanctions. Each party shall comply with all applicable sanctions, anti-money laundering and counter-terrorism financing laws in connection with this Agreement.
8.6 ECCTA 2023 s.199 compliance. Each party warrants that it has implemented reasonable procedures to prevent the facilitation of fraud by its associated persons under section 199 of the Economic Crime and Corporate Transparency Act 2023 (live for large organisations from 1 September 2025), and shall maintain those procedures in connection with the conduct of this Agreement.
8.7 Court jurisdiction. Subject to clause 4 (Governing Law), the parties' submission to the exclusive jurisdiction of the courts of England and Wales shall include all enforcement, interpretation and ancillary matters arising under this Agreement.
8.2 Insolvency cooperation — information only. In any Insolvency Event of the Borrower or Group Guarantor, the Senior Lender shall keep the Junior Lender reasonably informed of the conduct of the insolvency and the Senior Lender's voting intentions, but shall vote its own debt as it sees fit subject to the contractual obligations in this Agreement (including turnover).
8.3 Ipso facto protection. The parties acknowledge section 233B of the Insolvency Act 1986 (as inserted by the Corporate Insolvency and Governance Act 2020), which restricts a supplier's right to terminate or vary "essential supplies" by reason solely of the customer's insolvency. Nothing in this Agreement shall be construed as a contractual right inconsistent with that statutory regime where it applies to either Lender.
8.4 Reservation of rights. No failure or delay by any Lender in exercising any right under this Agreement shall operate as a waiver of that right, nor shall any partial exercise preclude further exercise. Rights under this Agreement are cumulative and not exclusive of any rights provided by law.
8.5 Sanctions and AML. Each party warrants that it is not, and to the best of its knowledge no member of its group is, subject to any UK, EU, US or UN sanctions. Each party shall comply with all applicable sanctions, anti-money laundering and counter-terrorism financing laws in connection with this Agreement.
8.6 ECCTA 2023 s.199 compliance. Each party warrants that it has implemented reasonable procedures to prevent the facilitation of fraud by its associated persons under section 199 of the Economic Crime and Corporate Transparency Act 2023 (live for large organisations from 1 September 2025), and shall maintain those procedures in connection with the conduct of this Agreement.
8.7 Court jurisdiction. Subject to clause 4 (Governing Law), the parties' submission to the exclusive jurisdiction of the courts of England and Wales shall include all enforcement, interpretation and ancillary matters arising under this Agreement.
9.
EXECUTION AS A DEED
This Agreement has been executed and delivered as a deed. Each company party executes under section 46 of the Companies Act 2006; each individual party (if any) executes under section 1 of the Law of Property (Miscellaneous Provisions) Act 1989. The parties intend that delivery occurs on the date written at the head of this Deed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated.
SENIOR LENDER
David Marlow, Partner
Aldgate Senior Lending Partners LLP
Date: ____________________
JUNIOR LENDER
Rebecca Cole, Managing Partner
Sycamore Mezzanine Fund III LP
Date: ____________________
BORROWER
Marcus Henley, Chief Financial Officer
Northwood Industries Ltd
Date: ____________________
GROUP GUARANTOR
Authorised Signatory
Northwood Holdings Ltd
Date: ____________________
Available as a print-ready PDF or an editable Microsoft Word (.docx) file.
What Is an Inter-Creditor Agreement?
An Inter-Creditor Agreement (also called a Subordination Agreement) is a multi-party contract between the senior and junior creditors of a borrower, together with the borrower itself and (typically) any group guarantor. It establishes the priority of debt service in normal trading, the standstill that prevents the junior creditor from enforcing during a senior default, the order in which enforcement proceeds are distributed (the "payment waterfall"), and the cooperation rules in insolvency.
The contractual subordination in an Inter-Creditor Agreement is effective in insolvency consistently with Re Maxwell Communications Corporation plc (No 2) [1993] BCLC 1200 — the leading UK authority confirming that contractual subordination operates as agreed in liquidation and administration. This allows lenders to structure multi-tranche financings that would otherwise be impossible: the senior lender accepts a lower interest rate in exchange for first-priority recovery; the junior lender accepts subordinated recovery in exchange for higher returns and (often) equity warrants.
In UK mid-market practice, the standard structure follows the Loan Market Association (LMA) standard form — published only to LMA members and licensees, and otherwise available behind Practical Law's enterprise paywall. Doxuno's template captures the LMA-aligned market standard: the 12-month senior standstill, BoE base rate plus 8% late payment interest (Late Payment Act 1998), Insolvency Act 1986 s.176A "Prescribed Part" carve-out (£800k cap under the 2020 Amendment Order), and the full enforcement coordination + turnover + amendment lock package.
What's Covered in This Template
This template covers the complete LMA-aligned UK Inter-Creditor structure, from basic subordination to full enforcement coordination.
Three or Four Parties
Senior Lender, Junior Lender, Borrower and optional Group Guarantor — all bound by the same agreement.
Senior + Junior Facility Identification
Term loan, RCF, mixed, mezzanine, subordinated loan, shareholder loan or second-lien — each with principal, date and maturity.
Subordination Basis
Pure subordination, subordination plus security priority, or structural subordination — Free baseline.
Payment Waterfall (Expert)
Standard LMA 9-step waterfall with Prescribed Part carve-out (IA 1986 s.176A — £800k cap), customisable modifications.
Standstill (Expert)
12-month default standstill with optional 6-month extensions on payment of fee — UK mezzanine standard.
Permitted Payments (Expert)
Scheduled junior interest pre-default; principal payments by mezzanine standard (none until senior repaid); fees in ordinary course.
Cure Rights (Expert)
Junior may cure senior default by paying senior — unlimited, capped (UK mezzanine standard) or none.
Enforcement Priority (Expert)
Senior leads always, senior-led with consultation, or coordinated pari passu.
Turnover Provisions (Expert)
Junior receipts held on trust for senior — full turnover (UK mezzanine standard) or excess only.
Amendment Locks (Expert)
Junior facility material amendments require senior consent; senior refinancing-in-kind protected.
Cross-Acceleration (Expert)
Acceleration of one facility triggers default under the other, with grace period for workout.
Compliance Stack (Expert)
IA 1986 s.233B ipso facto protection, sanctions warranty, ECCTA s.199 fraud prevention, dispute resolution.
How to Create an Inter-Creditor Agreement
Follow these steps to author a UK Inter-Creditor Agreement following LMA market standards.
- 1
Enter the Lenders & Borrower
Add Senior Lender, Junior Lender, Borrower and optional Group Guarantor details.
- 2
Identify Each Facility
Specify the senior facility (term loan, RCF, mixed) and junior facility (mezzanine, subordinated loan, shareholder loan, second-lien) with principal, date and maturity.
- 3
Set Subordination Basis
Pure subordination, subordination plus security priority (most common in UK mezzanine) or structural subordination.
- 4
Configure the Payment Waterfall (Expert)
Standard LMA 9-step waterfall with optional modifications — Prescribed Part carve-out automatic.
- 5
Set Standstill, Turnover & Amendment Locks (Expert)
12-month standstill (UK mezzanine standard), full turnover, material amendment senior consent.
- 6
Choose Execution Form & Download
Simple contract (6-year limitation) or deed (12-year — recommended for £5m+ facilities). Download as PDF.
Why Doxuno documents are different
Four things that make our templates more thorough than AI-generated drafts and more current than static template libraries.
Always current
Always current with the law
Templates carrying statute references are continuously updated as the law changes. Your document always reflects the current legal framework.
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Print-ready PDF
Free to download. Vector text, embedded fonts, statute citations baked in. Print, sign, file. Ready for any signing flow including electronic signature.
Word · .docx
Editable Word (.docx)
Continue editing in Word after download. Add custom clauses, reuse the template for similar agreements, or share with a colleague for collaborative review.
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Legal Considerations
UK Inter-Creditor Agreements operate at the intersection of contract, insolvency and security law — each affecting the enforceability of subordination in distress.
This template provides a market-aligned framework but is not legal advice. For deals above £10m, complex security packages, regulated lenders or cross-border financings, professional legal advice from a finance specialist is essential.
Reviewed for England & Wales, Scotland and Northern Ireland law
Effectiveness of Contractual Subordination in Insolvency
The leading authority confirming that contractual subordination survives liquidation and administration is Re Maxwell Communications Corporation plc (No 2) [1993] BCLC 1200. Subordination is effective if structured as either (a) a contractual undertaking by the junior creditor not to receive distributions until the senior is paid (the standard Inter-Creditor approach), or (b) a turnover trust under which any junior receipt is held on trust for the senior. Both mechanisms can be combined for belt-and-braces protection — the template uses both.
The LMA Payment Waterfall and the Prescribed Part Carve-Out
The LMA standard payment waterfall ranks: agent / security trustee fees first; then senior fees, costs and indemnities; senior interest; senior principal; then (only after the Senior Discharge Date) junior fees, interest and principal; finally any surplus to the borrower. The Prescribed Part under section 176A of the Insolvency Act 1986 is a statutory carve-out for unsecured creditors in administration / liquidation — currently capped at £800,000 by the Insolvency Act 1986 (Prescribed Part) (Amendment) Order 2020. It bypasses the senior's floating charge and reaches unsecured creditors generally, so it sits between the senior's secured recovery and junior recovery in any compliant waterfall.
Standstill and Permitted Payments — The Mezzanine Balance
A standstill prevents the junior from accelerating its facility or enforcing security for a defined period after a senior default — 12 months is the UK mezzanine standard. Without standstill, a junior default-acceleration would force the senior into reactive crisis management. Within standstill, Permitted Payments let the borrower continue paying scheduled junior interest pre-default — without them, the junior facility yields zero unless the senior is repaid in full (often years away). The balance of standstill length, permitted payments and cure rights is the commercial heart of the deal.
Cure Rights, Enforcement Coordination and Turnover
Cure rights let the junior pay the senior directly to remedy a senior default that would otherwise trigger enforcement wiping out junior recovery — typically capped at £2-5m and limited to 4 cure events. Enforcement coordination determines who runs the enforcement process; the UK mezzanine standard is "senior-led with consultation". Turnover is the mechanism that gives subordination teeth in insolvency: if the junior receives any payment from the borrower before senior is repaid, the junior holds it on trust and turns it over to the senior within 10 business days.
Cross-Acceleration, IA 1986 s.233B and Refinancing Protection
Cross-acceleration means a default under one facility constitutes a default under the other — UK mid-market practice is "with 30-day grace period after senior acceleration", allowing workout negotiations before the junior is forced to react. Section 233B of the Insolvency Act 1986 (post-CIGA 2020) restricts "ipso facto" termination of essential supplies — relevant if a senior amendment seeks to restrict the borrower's right to continue receiving supplies during distress. Senior refinancing protection lets the senior refinance its facility with like-for-like terms without triggering junior consent.
Frequently Asked Questions
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