Draft Markup Of Intercreditor Agreement

---
name: draft-markup-ica-second-lien-perspective
task_id: energy-natural-resources/draft-markup-of-intercreditor-agreement
description: Guides drafting of a second-lien lender's markup of an intercreditor agreement by identifying market-standard standstill concepts, DIP financing protections, credit-bidding considerations, and bankruptcy-related carve-outs, accompanied by an executive strategy memo that separates priority positions from negotiable positions.
activates_for: [planner, solver, checker]
---

# Skill: Draft Markup of Intercreditor Agreement from Second Lien Lenders' Perspective

## 1. Subject-matter triage

- Treat the agreement as a negotiated credit document that allocates enforcement, bankruptcy, and collateral-control rights between senior and second-lien lenders.
- Read the engagement instructions first to identify the client’s non-negotiables, negotiation room, and any deal-specific constraints before drafting markup language.
- If the source set includes multiple versions, schedules, exhibits, or related financing documents, map them before revising so the markup tracks the operative hierarchy and defined terms consistently.

## 2. Failure modes the skill is correcting

- Baseline produces a substantive markup but omits basic bankruptcy-preservation language in the list of actions the junior lienholder may take.
- Baseline produces only one deliverable rather than both an executive strategy memo and an annotated redline markup.
- Baseline revises a clause without tying the change to the affected enforcement, priority, or bankruptcy consequence.
- Baseline relies on color or strike formatting alone, leaving the change unreadable after export.
- Baseline gives advice without separating hard positions from concession points or without a clear action plan.

## 3. Legal frameworks / domain conventions that apply

- Standstill period: evaluate whether the senior lender has exclusive enforcement rights during the restricted period, whether the trigger mechanics are workable, and whether any requested limitation preserves collateral value for the second lien class.
- Bankruptcy preservation: preserve ordinary creditor-protection actions that should remain available notwithstanding the standstill, including claim-preservation and participation steps consistent with the document structure and applicable bankruptcy practice.
- DIP financing and collateral protection: assess whether post-petition financing rights are drafted to prevent unnecessary erosion of junior recovery and whether any lien or priming concept is confined to the proper collateral scope.
- Credit bidding: assess whether the second lien lender may credit bid an allowed secured claim in a sale process and whether any priority condition improperly delays or negates that right.
- Adequate protection and superpriority: ensure the agreement does not contract away rights that arise by operation of bankruptcy law rather than by private ordering.
- Collateral release and disposition baskets: test any release authority, basket, or aggregate cap for creep; add procedural checks where needed to prevent unchecked collateral erosion.
- Purchase option mechanics: if a buyout right exists, test pre-acceleration timing, exercise window, diligence access, funding mechanics, and transfer steps for practical usability.
- Agreement interpretation and hierarchy: keep defined terms, waiver language, and enforcement mechanics aligned with the intercreditor’s priority structure and any related financing documents cited in the source set.

## 4. Analytical scaffolds

- Start by separating provisions into: acceptable as-is, acceptable with targeted revision, and unacceptable from the second-lien perspective.
- For each provision needing revision, identify the clause’s function, the risk it creates for the junior lender, and the narrowest change that protects the client without undermining the overall deal.
- Where bankruptcy concepts are implicated, tie the requested language to the relevant bankruptcy principle or market convention and explain how the clause would operate in a restructuring or sale path.
- For any preserved-rights list, check that it includes ordinary creditor-preservation actions and does not silently waive actions the junior lender needs to maintain its claim, priority, or participation rights.
- Where a buyout, release, consent, or enforcement trigger is involved, test both the substantive standard and the procedural mechanics; a right that exists only in theory should be treated as incomplete.
- State the governing legal authority or market principle for each material legal proposition relied on, using the controlling statute, rule, or recognized doctrine where applicable.

## 5. Vertical / structural / temporal relationships

- Analyze the hierarchy between senior and second lien rights, then map how those rights change before default, during standstill, after acceleration, in bankruptcy, and in a sale process.
- When a provision turns on a trigger, define the trigger first, then the restricted period, then the preserved carve-outs, and finally the end-state consequence for each party.
- If the task includes more than one relevant transaction state, address each state separately rather than using a single blended analysis.
- For any issue that depends on another clause, cross-check the related section so the redline does not create an internal contradiction in enforcement, transfer, or priority mechanics.

## 6. Output structure conventions

- Produce two deliverables: an executive strategy memo and an annotated redline markup of the intercreditor agreement.
- Draft the redline markup first as the operative deliverable, then prepare the strategy memo after the markup exists and is complete.
- Use robust textual markup in addition to any visual formatting so changes remain intelligible in plain text and .docx export; flag every substantive edit with clear add/delete/substitution markers and a short rationale note.
- In the strategy memo, separate positions into non-negotiable and negotiable categories, and tie each category to the client’s stated priorities and the affected agreement sections.
- In the annotated markup, give each changed provision a brief severity label using a consistent ordinal scale defined once at the top of the memo or markup; apply it uniformly.
- For each substantive issue or proposal, include the affected clause, the reason for the requested change, and the practical consequence for the second-lien client.
- End the advisory memo with a concise Recommended Actions block that assigns each action to a role and timing anchor tied to the transaction workflow.
- Ensure both deliverables are complete and internally consistent before concluding; the named files should contain operative content, not a mere description of what would be drafted.