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Subordination Agreement

Draft Subordination Agreements in Minutes, Not Hours

12 minutes with CaseMark

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Subordination Agreement

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Workflow

Subordination Agreement

Overview

Drafting subordination agreements manually requires extensive research across multiple loan documents, security agreements, and state-specific legal requirements. Attorneys spend hours identifying creditor priorities, verifying lien positions, and ensuring compliance with standard subordination provisions while cross-referencing templates from multiple sources.

Drafting subordination agreements requires coordinating multiple debt instruments, analyzing complex priority structures, and ensuring enforceability in bankruptcy. Attorneys spend hours reviewing loan documents, extracting party details, and crafting precise standstill provisions that protect senior lenders while addressing junior creditor concerns. Manual drafting risks inconsistent terminology, incomplete turnover provisions, and inadequate bankruptcy protections.

CaseMark analyzes your loan documents and automatically generates comprehensive subordination agreements with precise payment priorities, standstill obligations, and bankruptcy provisions. Our AI extracts party information, debt terms, and collateral descriptions from existing documents, then drafts enforceable subordination language tailored to your transaction structure. Get sophisticated commercial finance documents in minutes with complete creditor protection provisions.

How it works

  1. 1. Upload your documents

  2. 2. AI analyzes and extracts key information

  3. 3. Review and customize the generated content

  4. 4. Export in your preferred format (DOCX, PDF)

What you get

  • Parties

  • Recitals

  • Subordination Provisions

  • Representations and Warranties

  • Conditions and Covenants

  • Governing Law and Miscellaneous

  • Signatures

What it handles

  • Parties

  • Recitals

  • Subordination Provisions

  • Representations and Warranties

  • Conditions and Covenants

  • Governing Law and Miscellaneous

  • Signatures

Required documents

  • Senior Loan Agreement

    The primary credit agreement, loan agreement, or promissory note evidencing the senior debt, including all amendments and restatements

    PDF, DOCX

  • Subordinated Debt Documents

    The loan agreement, promissory note, or other documents evidencing the debt to be subordinated

    PDF, DOCX

  • Security Agreements

    All security agreements, mortgages, deeds of trust, or UCC financing statements relating to collateral for either debt

    PDF, DOCX

Supporting documents

  • Intercreditor Agreement

    Any existing intercreditor or subordination agreements affecting the transaction

    PDF, DOCX

  • Term Sheet or Commitment Letter

    Documents outlining the required terms of the subordination arrangement

    PDF, DOCX

  • Borrower Financial Statements

    Current financial information to inform permitted payment provisions and financial covenants

    PDF, XLSX

  • Corporate Resolutions

    Board resolutions or other authorizations for entering into the subordination agreement

    PDF, DOCX

Why teams use it

Reduce drafting time from 4+ hours to under 15 minutes with AI-powered automation

Automatically extract creditor details and debt terms from existing loan documents

Generate state-compliant subordination provisions with verified legal standards

Ensure comprehensive coverage of representations, warranties, and covenants

Maintain consistency across multiple subordination agreements with standardized templates

Questions

What is the difference between payment subordination and lien subordination?

Payment subordination prohibits the junior creditor from receiving payments until the senior debt is satisfied, while lien subordination establishes that the senior creditor's security interest has priority in collateral. Most subordination agreements include both payment and lien subordination. CaseMark drafts comprehensive provisions addressing both types of subordination with clear priority rules and enforcement mechanisms.

How does a subordination agreement work in bankruptcy?

In bankruptcy, subordination agreements remain enforceable and establish the priority of creditor claims against the debtor's estate. The subordinated creditor must typically vote their claims as directed by the senior creditor and cannot object to the senior creditor's adequate protection or financing requests. CaseMark includes detailed bankruptcy provisions ensuring your subordination survives insolvency proceedings and establishes clear rights for claim voting, turnover obligations, and priority of liens.

Can subordinated creditors receive any payments before senior debt is paid off?

Subordination agreements often allow limited permitted payments to subordinated creditors, such as regular interest payments, provided no default exists under the senior debt and specified financial conditions are met. The scope of permitted payments is negotiated based on the transaction structure and senior lender requirements. CaseMark can draft flexible permitted payment provisions with automatic suspension triggers if defaults occur or financial performance deteriorates.

Do I need the borrower to be a party to the subordination agreement?

While not always required, including the borrower as a party strengthens enforceability by obtaining their acknowledgment of payment priorities and agreement to comply with the subordination. This prevents the borrower from claiming confusion about payment instructions and provides additional remedies if payments are made incorrectly. CaseMark includes the borrower as a party with appropriate acknowledgments, representations, and covenants to ensure clear payment obligations and prevent disputes.

How specific do collateral descriptions need to be in a subordination agreement?

Collateral should be described with sufficient specificity to identify what assets are subject to the subordination, typically by referencing the legal descriptions in the underlying security agreements. For real property, include the street address and reference to recorded instruments. For personal property, reference UCC financing statements or describe the collateral categories. CaseMark extracts collateral descriptions from your uploaded security documents and incorporates them with appropriate specificity and cross-references to underlying instruments.

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