An intercreditor and collateral agency agreement is one which is entered into by the collateral agent and the various creditors. The collateral agent acts on behalf of all the secured lenders in order to protect the interests of the lenders and safeguard any defaults on account of lending.
The collateral agency is entrusted with the collateral security pledged by the borrowers. As and when there is a default by the borrowers the collateral agency comes into foray to settle the borrowed amount by going in for a foreclosure by setting aside the amount from the sale of the collateral security obtained.
The collateral agency provides the borrowers with sufficient notice of the sale of collateral security before three months. The intercreditor and collateral agency agreement ensures that the debts do not turn bad and acts as a guarantee for the lending. The agreement sets out the terms on which the collateral will be provided by the borrowers and under what circumstances will it be foreclosed.
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