Subordination clause

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Subordination clause

A provision in a bond indenture that restricts the issuer's future borrowing by subordinating future lenders' claims on the firm to those of the existing bondholders.

Subordination Clause

A clause in some contracts for debt stating that in the event of bankruptcy or liquidation, the debt in the contract will take priority over all other debts. This protects the creditor in the event that the debtor defaults. It is most common in mortgages and bonds. See also: Absolute Priority Rule.
References in periodicals archive ?
obtain mortgage subordination agreements, or prepare baseline
Loan terms must contain the following, the legal experts said: The definition of a default and cure requirements in the event of default, a requirement for the borrower to provide notice in the case of government action, money laundering provisions, reporting requirements and subordination agreements.
L Hernault focuses her practice on representing lenders in all aspects of secured and unsecured financing transactions, including drafting and negotiating credit agreements, security documents, letters of credit, subordination agreements, and inter-creditor agreements and negotiating and documenting debt restructuring agreements.
34) The Aerosol Court interpreted the scope of Section 510(a) broadly as permitting the enforcement of subordination agreements (includ-ing delegation of voting rights) so long as such agreements are enforceable under applicable nonbankruptcy law.
Debt service coverage has remained good for the 2001 series of subordinated bonds despite a restructuring of senior bond debt service, due to strong development and subordination agreements with overlapping taxing entities.
Mellberg also works extensively in real estate secured financing on behalf of both lender and borrower, with high level expertise in complex subordination agreements.
In connection with the SPA, the Initial Investors agreed to enter into subordination agreements (the "Subordination Agreements") with each of Silicon Valley Bank and NEIPF, L.
Fitch reviewed the document exception report provided by the trustee, which indicated all loans had document exceptions ranging from missing assignments of mortgages, missing assignments of leases and rents and various subordination agreements.
The city has agreed to subordinate its pass-through to debt service and subordination agreements are pending with the school district and county.
She has considerable expertise in the financing of leveraged acquisitions, work-outs, representing agents and others in large syndicated credit facilities, and complex intercreditor and subordination agreements in both debt restructurings and LBO transactions.
Other options include: Escrow Accounts, Preferred Partnership Program, Assignment of Proceeds, Flooring, Cash, Leasing and Credit Enhancements (cross-corporate guarantees, personal guarantees, subordination agreements and security agreements).