Managing priority arrangements between security interests

The order of priority between competing security interests determines the order in which each of the secured creditors can claim and be paid out on the secured property in an enforcement or insolvency scenario. This makes priority something very important in the context of a project finance transaction, where for eg, the project lenders would want to be a higher-ranking (or the highest-ranking) creditor.

This guidance note considers the contractual arrangements that can be put in place for managing priority as between security interests in a project finance transaction, in particular, regarding the use of an inter-creditor agreement. It also explains the role of a deed or priority and a subordination agreement. Importantly, legal practitioners should note that the PPS Act refers to priority agreements for security interests subject to the PPS Act as "subordination agreements". This guidance note explains this, as well as discusses the relevant model documents that legal practitioners may choose to utilise in a project finance transaction.

See Managing priority arrangements between security interests.