Intercreditor Agreement Wiki

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The junior lender should consider including in the agreement terms for resuming the project in the event of a delay by the borrower. If such a situation occurs, the junior lender should know that there are usually only two options: either inject finance into the project to cure the loss of money under the senior Lender, or pay the senior Lender. This last point is often almost impossible when the priority lender has provided very large sums of financing. For example, Acme Coal co. imports coal. Energen Inc. provides energy to consumers. The two companies agree to build a power plant to achieve their respective goals. Typically, the first step would be to sign a memorandum of understanding to set out the intentions of both parties. It would be followed by an agreement to create a joint venture. A project may be subject to a number of technical, environmental, economic and political risks, particularly in developing and emerging countries. Financial institutions and project promoters may conclude that the risks associated with the development and operation of projects are unacceptable (non-financial).

“Several long-term contracts, such as construction, supply, purchase and concession contracts, as well as a large number of condominium structures, are used to create incentives and discourage opportunistic behavior from parties involved in the project.” [3] Implementation templates are sometimes referred to as “project resolution methods”. Funding for these projects must be distributed among several parties in order to spread the risk associated with the project while ensuring benefits for each party involved. . . .

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