Drafting subordination agreements manually requires extensive research across multiple loan documents, security agreements, and state-specific legal requirements. Attorneys spend hours identifying creditor priorities, verifying lien positions, and ensuring compliance with standard subordination provisions while cross-referencing templates from multiple sources.
Drafting subordination agreements requires coordinating multiple debt instruments, analyzing complex priority structures, and ensuring enforceability in bankruptcy. Attorneys spend hours reviewing loan documents, extracting party details, and crafting precise standstill provisions that protect senior lenders while addressing junior creditor concerns. Manual drafting risks inconsistent terminology, incomplete turnover provisions, and inadequate bankruptcy protections.
CaseMark analyzes your loan documents and automatically generates comprehensive subordination agreements with precise payment priorities, standstill obligations, and bankruptcy provisions. Our AI extracts party information, debt terms, and collateral descriptions from existing documents, then drafts enforceable subordination language tailored to your transaction structure. Get sophisticated commercial finance documents in minutes with complete creditor protection provisions.
This workflow is applicable across multiple practice areas and use cases
Subordination agreements are essential in loan and financing transactions to establish creditor priority when multiple lenders provide financing to the same borrower.
This is a core document in commercial lending and financing transactions, directly addressing the relationship between senior and junior lenders in multi-creditor financing structures.
M&A transactions frequently involve seller financing that must be subordinated to acquisition financing, requiring subordination agreements to protect senior lenders.
The workflow explicitly targets M&A attorneys handling seller financing subordination, and subordination agreements are common in leveraged buyouts and acquisition financing structures.
Commercial real estate transactions often involve multiple layers of financing with different lien priorities requiring subordination agreements between construction lenders, permanent lenders, and mezzanine lenders.
The workflow targets real estate finance lawyers coordinating multiple lien priorities, and subordination agreements are standard in commercial real estate financing with multiple creditors.
Bankruptcy proceedings require analysis and enforcement of subordination agreements to determine creditor priority and distribution rights in reorganization or liquidation.
The workflow targets restructuring attorneys addressing creditor priorities, and subordination agreements are critical documents in bankruptcy cases for establishing the waterfall of creditor claims.
Financial institutions must draft and review subordination agreements to comply with regulatory capital requirements and manage risk in multi-creditor lending arrangements.
The workflow targets in-house counsel at financial institutions, and subordination agreements are important for regulatory compliance and risk management in commercial banking operations.
Payment subordination prohibits the junior creditor from receiving payments until the senior debt is satisfied, while lien subordination establishes that the senior creditor's security interest has priority in collateral. Most subordination agreements include both payment and lien subordination. CaseMark drafts comprehensive provisions addressing both types of subordination with clear priority rules and enforcement mechanisms.
In bankruptcy, subordination agreements remain enforceable and establish the priority of creditor claims against the debtor's estate. The subordinated creditor must typically vote their claims as directed by the senior creditor and cannot object to the senior creditor's adequate protection or financing requests. CaseMark includes detailed bankruptcy provisions ensuring your subordination survives insolvency proceedings and establishes clear rights for claim voting, turnover obligations, and priority of liens.
Subordination agreements often allow limited permitted payments to subordinated creditors, such as regular interest payments, provided no default exists under the senior debt and specified financial conditions are met. The scope of permitted payments is negotiated based on the transaction structure and senior lender requirements. CaseMark can draft flexible permitted payment provisions with automatic suspension triggers if defaults occur or financial performance deteriorates.
While not always required, including the borrower as a party strengthens enforceability by obtaining their acknowledgment of payment priorities and agreement to comply with the subordination. This prevents the borrower from claiming confusion about payment instructions and provides additional remedies if payments are made incorrectly. CaseMark includes the borrower as a party with appropriate acknowledgments, representations, and covenants to ensure clear payment obligations and prevent disputes.
Collateral should be described with sufficient specificity to identify what assets are subject to the subordination, typically by referencing the legal descriptions in the underlying security agreements. For real property, include the street address and reference to recorded instruments. For personal property, reference UCC financing statements or describe the collateral categories. CaseMark extracts collateral descriptions from your uploaded security documents and incorporates them with appropriate specificity and cross-references to underlying instruments.