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 ?
Although another attorney prepared the note, subordination agreement, and mortgage, the referee found that lawyer (who is currently a partner of the respondent lawyer but was not at the time) did not provide independent advice to or represent the client and there was no written agreement about the lawyer's effective partnership with the client.
subordination agreement is obtained at the time of the gift.
The two most common legal documents are the inter-creditor agreement and the subordination agreement.
Therefore, if a mortgage exists, the property owner (or one's legal counsel) must submit a mortgage subordination agreement, with a copy of the conservation easement deed, to each mortgage lender for its approval.
A subordination agreement is necessary to guarantee that the enforcement rights and restrictions contained in the easement run with the property in perpetuity.
293, 296 (1982) ("A subordination agreement would be nearly useless if not enforceable in a bankruptcy case.").
It also required the Kaufmans to acquire a subordination agreement from the bank that held a mortgage on the property to satisfy the perpetuity provision of the Code.
Mitchell had argued to the court that the mortgage was subordinated by virtue of the subordination agreement signed by the mortgagee, Clyde Sheek; in 2005.
Ellis, president of First Service Bank, on a subordination agreement when he tried to use $4 million in certificates of deposit that secured a First Service loan to secure another loan from Chambers Bank of Danville.
The lender's rights are often vitally affected by the terms of a subordination agreement or a common variation called the SNDA, which the owner, lender and operator may have executed.
Hirschfeld further dismissed as irrelevant the fact that Elie was named as a secretary of the Vertical Club Corporation in papers filed in a subordination agreement, saying they dated back to 1985.
First Commercial also claims that Chambers and Melton have violated the loan's subordination agreement, choosing to pay corporate debt owed to Chambers rather than paying on the bank loan.