While, for any mezzanine loan or second pawnshop, the loan or investment contract is the main document defining the lender`s rights and the limits for the borrower, the intercredit agreement between the junior lender and the senior Lender severely limits the exercise or enjoyment by the junior lender of its main rights, including the right to interest payments (and, where applicable, principal) and the right to recover the loan and confiscate security rights. That is why it is of the utmost importance that junior lenders focus on the details of the interconnection agreement at an early stage of loan negotiation. 5. How does a Junior Lender best protect itself? Once a junior lender has their checklist with key topics, they should try to tackle them as early as possible in the process. An effective way to do this is to include these points in the roadmap with the borrower and ask the borrower to clarify them with the existing or proposed priority lender. Whether the main conditions of subordination are contained in a roadmap, request and verify a copy of the intercreditor agreement at the beginning of the transaction. The elimination of time constraints often allows the senior to obtain all the necessary authorizations to change his form and negotiate for the junior lender and the senior Lender a creative solution to a difficult problem. It is obvious that cooperation with older lenders who have experience in managing mezzanine lenders or on the other hand, who are familiar with the standard protection rules of junior lenders or with whom a junior lender has worked before, can go a long way in facilitating the process. In order to avoid being held indefinitely in a standby position, the mezzanine lender may try to include a status quo agreement in the act of interconnection. Under such an agreement, the mezzanine lender may inform the priority lender of its intention to accelerate its debts or take other enforcement action.

Where the priority lender does not take enforcement action after notification and the default occurs after the expiry of a specified «standstill» period (which may be a period of 90, 120, 150 or 180 days or even a combination that varies depending on the nature of the default), the mezzanine lender is allowed to take enforcement action. . . .