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Loan Subordination Agreement

Loan Subordination Agreement Template for Germany

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Key Requirements PROMPT example:

Loan Subordination Agreement

"I need a German law Loan Subordination Agreement for a manufacturing company with existing senior bank debt of €20M and new subordinated shareholder loans of €5M, with the senior debt maturing in March 2025."

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Document background
A Loan Subordination Agreement is essential in complex financing structures where multiple creditors provide debt to the same borrower. Under German law, these agreements must carefully address the requirements of the Insolvency Code (InsO), particularly regarding the enforceability of subordination in insolvency proceedings. The document establishes the hierarchy of debt, payment restrictions, and turnover obligations, while ensuring compliance with §39(2) InsO. It is typically used in refinancing situations, acquisition financing, or restructuring scenarios where there are multiple layers of debt. The agreement includes detailed provisions on payment mechanics, enforcement rights, and insolvency scenarios, making it a crucial document for managing intercreditor relationships in German financing transactions.
Suggested Sections

1. Parties: Identification of the senior creditor(s), subordinated creditor(s), and the debtor

2. Background: Context of the existing loans and reason for subordination

3. Definitions: Definitions of Senior Debt, Subordinated Debt, Enforcement Action, Insolvency Event and other key terms

4. Subordination: Core provisions establishing the subordination of the junior debt to the senior debt

5. Turnover Provisions: Obligations to turn over any payments received in breach of subordination

6. Payment Restrictions: Restrictions on payments of subordinated debt

7. Insolvency Provisions: Specific provisions dealing with insolvency scenarios and compliance with §39(2) InsO

8. Representations and Warranties: Basic representations regarding authority, enforceability, and ownership of the debt

9. Amendments and Waivers: Provisions governing changes to the agreement

10. Governing Law and Jurisdiction: Specification of German law and jurisdiction clause

Optional Sections

1. Security Provisions: Required if any of the debt is secured, addressing ranking of security interests

2. Buy-out Rights: Optional provisions allowing subordinated creditors to buy out senior debt under specific circumstances

3. Administrative Party Provisions: Required if there is an administrative agent or security trustee

4. Accession Provisions: Required if additional creditors may join the agreement in the future

5. Information Rights: Optional provisions regarding information sharing between creditor groups

6. Assignment and Transfer: Detailed provisions on debt transfer if not covered in main provisions

Suggested Schedules

1. Existing Senior Debt: Details of all senior debt facilities covered by the agreement

2. Existing Subordinated Debt: Details of all subordinated debt facilities covered by the agreement

3. Form of Accession Deed: Standard form for new creditors to accede to the agreement

4. Notice and Acknowledgment: Form of notice to debtor and acknowledgment of subordination terms

5. Security Documents: List of security documents if applicable

Authors

Alex Denne

Head of Growth (Open Source Law) @ ºÚÁÏÊÓƵ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
Relevant legal definitions



















































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Relevant Industries

Banking & Financial Services

Private Equity

Corporate Finance

Real Estate

Infrastructure

Manufacturing

Healthcare

Technology

Energy

Construction

Relevant Teams

Legal

Finance

Treasury

Credit Risk

Corporate Finance

Restructuring

Compliance

Banking

Deal Advisory

Capital Markets

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Legal Counsel

Debt Finance Lawyer

Restructuring Officer

Credit Risk Manager

Investment Manager

Loan Officer

Corporate Finance Manager

Insolvency Practitioner

Banking Relationship Manager

Industries






Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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