An inter-creditor agreement (ICA) refers to a legal agreement entered into by two or more creditors. The agreement outlines the rights and responsibilities of each creditor in regard to a particular borrower and a certain debt. The ICA is typically used in situations where there are multiple creditors involved in a debt financing transaction.

The purpose of an ICA is to establish a clear understanding between the creditors regarding their respective positions. This includes the order of priority for repayments, the distribution of recoveries, and other key terms. The ICA is especially important when the same borrower has multiple loans and different creditors have different interests and priorities.

Some of the key provisions that are typically included in an ICA include:

1. Seniority and Subordination: An ICA establishes the order of priority for repayments in the event of default. This is important because different creditors may have different positions in the priority queue. The ICA will establish whether a creditor is senior or subordinate to another creditor.

2. Enforcement: The agreement will outline the process for enforcing a default. This may include the right to take legal action, the right to take possession of assets, or the right to sell collateral.

3. Sharing of Proceeds: An ICA outlines the distribution of recoveries in the event of a default. This includes the right to recover the principal amount, interest, and other fees.

4. Communication: The ICA will establish a communication protocol between the creditors. This is important to ensure that all parties are aware of any events or actions that could impact the repayment of the debt.

The ICA is a critical document for any debt financing transaction where multiple creditors are involved. It helps to ensure that all parties have a clear understanding of their respective positions and can work together to maximize their recovery in the event of a default.