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Any first-lien lenders that permit a borrower to obtain second-lien financing will try to ensure that their interests are primary to those of the second-lien lender should the borrower file for bankruptcy or default. The relative positions of first and second-lien lenders are typically described in intercreditor, or subordination, agreements that generally subordinate the rights of the second-lien lender regarding the collateral and payments from the borrower. These agreements often feature stipulations restricting the second-lien lender’s rights in the event of borrower bankruptcy.

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