Recently, several courts have published decisions interpreting the rights granted to mezzanine lenders under intercreditor agreements - I've recently co-authored this Dechert OnPoint detailing the cases. These decisions, in large part, follow the holding of the Stuytown decision (not great news for many subordinate lenders). Also, a recent decision from the United States Bankruptcy Court for the District of Massachusetts, which holds that the assignment of a junior mortgage lender’s voting rights contained in an intercreditor agreement is unenforceable in a bankruptcy case, indicates there are some limits to how far bankruptcy courts will go to serve senior lenders (better news for subordinate lenders).
As we approach a time where an increasing number of mezzanine lenders may seek to enforce their rights, insight into how courts will interpret intercreditor agreements becomes increasingly important. For even more in-depth information and analysis about these recent cases, and their potential impact on senior and junior lenders, click here to read Dechert's OnPoint.
By: Matt Clark