subordination-agreement

name	subordination-agreement
title	Subordination Agreement
description	Drafts debt subordination agreements establishing senior/junior creditor priority, payment waterfalls, standstill provisions, turnover obligations, and bankruptcy treatment. Use when drafting subordination agreements, intercreditor arrangements, creditor priority documents, or debt subordination terms during negotiation or closing.
author	CaseMark
author_url	https://github.com/CaseMark/skills/tree/main/skills/legal/subordination-agreement
license	Apache-2.0
version	0.1.0
execution_mode	open
jurisdiction	us
practice	finance
language	en

Subordination Agreement

Drafts a subordination agreement establishing creditor claim priority, payment waterfall mechanics, and intercreditor rights for debt transactions.

Quick Start

Gather before drafting:

1. Senior Debt instruments — principal, rate, maturity, collateral, default provisions
2. Junior Debt instruments — same details plus any existing subordination or intercreditor arrangements
3. Party information — legal names, jurisdictions, authorized signatories for Senior Creditor, Junior Creditor, and Debtor
4. Security interests — collateral descriptions, lien positions, guarantees, cross-default provisions
5. Commercial terms — complete vs. partial subordination, permitted junior payments (if any), standstill duration

Core Workflow

Draft the following sections in order.

1. Recitals

Element	Content
Senior Debt	Material terms — principal, rate, maturity, instrument date
Junior Debt	Material terms — same
Business purpose	Why subordination is needed
Consideration	What supports the agreement

2. Definitions

• "Senior Debt" — principal, accrued interest, fees, enforcement costs, post-petition interest
• "Junior Debt" — full scope of junior obligations
• "Payment in Full" — treatment of contingent obligations, indemnities, post-petition interest
• "Permitted Junior Payments" — carve-outs from subordination (if partial)
• "Default Period" — trigger for standstill and enforcement restrictions

3. Subordination Mechanics

Waterfall: Senior Debt (principal + interest + fees + enforcement costs) → only after Payment in Full → Junior Debt.

• All Junior Debt payments/distributions/recoveries subordinated to prior Payment in Full of Senior Debt
• Junior Creditor barred from receiving payments except Permitted Junior Payments (if any)
• Standstill: no acceleration, enforcement, or remedy by Junior Creditor without Senior Creditor consent during Default Period