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Loan Subordination Agreement Template for Singapore

A Loan Subordination Agreement under Singapore law is a legal document that establishes the priority of different debts owed by a borrower, creating a hierarchy between senior and junior creditors. It formally documents the agreement of junior creditors to subordinate their right to payment behind senior creditors, particularly relevant in Singapore's sophisticated financial market where multi-tiered financing structures are common. The agreement operates within Singapore's robust legal framework, particularly under the Companies Act 1967 and Banking Act 1970.

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What is a Loan Subordination Agreement?

A Loan Subordination Agreement is essential in complex financing structures where multiple lenders are involved with the same borrower. This document establishes a clear hierarchy of payment rights, with junior creditors agreeing to subordinate their claims to those of senior creditors. Under Singapore law, these agreements are particularly important in corporate restructuring, project finance, and leveraged finance transactions. The agreement typically includes detailed provisions on payment restrictions, turnover of proceeds, and enforcement rights, ensuring clarity in creditor rankings and helping prevent disputes in default scenarios.

What sections should be included in a Loan Subordination Agreement?

1. Parties: Identification of Senior Creditor(s), Junior Creditor(s), and Borrower

2. Background: Context of existing debts and purpose of subordination

3. Definitions: Key terms including Senior Debt, Junior Debt, Subordination Period

4. Subordination Provisions: Core terms of debt subordination and payment restrictions

5. Turnover of Proceeds: Provisions for handling payments received in violation of subordination

6. Representations and Warranties: Standard confirmations from parties regarding authority and enforceability

7. Duration: Term of the subordination arrangement

What sections are optional to include in a Loan Subordination Agreement?

1. Security Provisions: Additional provisions when secured debt is involved, including ranking of security interests and enforcement rights

2. Intercreditor Provisions: Detailed arrangements between multiple creditors, including voting rights and enforcement procedures

3. Standstill Provisions: Restrictions on enforcement actions during specified periods, including conditions and duration of standstill

What schedules should be included in a Loan Subordination Agreement?

1. Schedule of Existing Senior Debt: Details of all senior debt covered by the agreement including amounts, dates, and key terms

2. Schedule of Existing Junior Debt: Details of all junior debt covered by the agreement including amounts, dates, and key terms

3. Form of Accession Deed: Template for additional parties to join the agreement post-execution

4. Payment Waterfall: Detailed order of payment priorities in various scenarios including enforcement and insolvency

Authors

Alex Denne

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

Jurisdiction

Singapore

Publisher

Genie AI

Cost

Free to use

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