Managing Creditor Risk through Inter-Creditor Agreements


James is the CEO of  HOC Global Logistics, a company which provides shipping solutions to large organisations. Having become tired of leasing cargo ships from large vessel owners, the company desires to purchase its own ships which they can use and also lease to 3rd parties. James approaches Lakeside Bank for a Term Loan to finance the $50 million transaction.

The Bank after reviewing the loan proposal filed by HOC Logistics, informed James that the transaction was larger than Lakeside bank could comfortable handle. However they are able to loan him $20 million on the security of the purchased ship. James accepts the terms and applies for loans from Cityscape Capital Ltd , HSCB, Shanghai Bank  and Union Finance Ltd. The individual loans have different terms, interest rates and security interests. The complexity of the transaction is so mind boggling that James sets up an appointment with his Lawyers to advise him on how to manage the relationships between the multiple creditors in such a manner as to enable the company satisfy all its loan liabilities. He is advised to structure and negotiate an intercreditor agreement among the several creditors, thereby ensuring he has a more convenient financing process.

An intercreditoragreement seeks to govern the relationship between a range of creditors providing finance to the same borrower. An intercreditor agreement entered into by senior and junior creditors can be expected to rank the senior and junior security, subordinate the debt of the junior creditors to that of the senior creditors, restrict the junior creditors’ rights of enforcement for a specified standstill period and impose payment freezes on the junior debt in prescribed default situations.

In highly leveraged transactions such as leveraged buyouts and certain acquisition finance transactions, funding may be structured into a number of different tranches of lenders who stipulate slightly different lending terms and interest rates for the funds they advance. Senior lenders and mezzanine lenders usually take security over the assets of the borrower, over shares acquired and over the target group’s assets. In addition, guarantees will be given by the borrower and may also be given by the target group.

The senior creditors tend to have a stronger negotiating position than do the junior creditors, so it is usual practice for the senior bank lenders and mezzanine lenders to appoint a single security agent (or security trustee) to hold the security package on trust for the benefit of all the secured creditors. The intercreditor agreement contains provisions dealing with enforcement of the security, usually requiring the junior creditors (the mezzanine lenders) to desist from enforcement for the standstill period so as to leave the way clear for the senior creditors (the senior lenders and any hedge counterparties) to instruct the security agent as to when and how to enforce their right to the secured assets.



We all get business or project ideas from time to time, some of these ideas flit around within our minds like moths seeking the light, others run around like puppies seeking expression, and others still pound insistently upon the walls of our minds, giving us no respite until they find expression through our actions.

However, before you go hell for leather chasing each business idea which comes to mind, we have outlined some steps which may aid you in the successful and sustainable executions of your ideas. These tips will also work for the business manager who needs to implement some strategic or operational business objective, as well as the project or team leader tasked with delivering a stated objective.

  • ASSIGN PROJECT LEADERS WHO WILL DRIVE EXECUTION: This especially applies to medium to large businesses, but may be applicable to small businesses as well. Every idea needs to have a key person who is responsible for interacting with stakeholders and driving the execution of the idea and delivering strategic, operational and tactical objectives to project stakeholders in terms with parameters laid down by project stakeholders. That person needs to be empowered to implement strategies required to deliver tasks that will move an idea forward.
  • IDENTIFY AND EVALUATE AVAILABLE AND DESIRED RESOURCES: Capital is an indispensable business input, and to many entrepreneurs, it appears to be sole input required to build a business. However, knowledge base, market intelligence, proper product design and the right team are important aspects of the execution process. The business owner/manager/project leader should evaluate which resources are required to execute their strategic, tactical and operational objectives and identify whether they possess those resources in the appropriate quantities required to achieve their stated objectives.
  • IDENTIFY AND EVALUATE CHALLENGES: The Business owner/ manager/ project leader should strive to identify and evaluate external obstacles (Macro–economic issues, market dynamics, and government regulations) that may impede the successful implementation of the idea. They should also evaluate their internal resources and capacity (financial, operational, legal) to achieve their  objectives  and mitigate or obviate any detected weaknesses during the planning and implementation process. That will ensure that the idea gets properly executed in the face of foreseen or unforeseen resistance.
  • SET SPECIFIC TIMELINES: The problem with many new ventures is that they have to fit in among team members existing job responsibilities. Consequently, procrastination  project delays may arise as more pressing issues and challenges arise within and outside the project environment. To create time pressure for the new venture, the business owner/manager/project leader should define specific deadlines by which actions and tasks have to be executed and supervise the delivery of team objectives in terms of the laid down timelines. In laying down these timelines, the team leader should consider the critical path required to achieve defined objectives at the highest quality, with negative impact on team members or team resources.
  • CREATE A MASTERMIND NETWORK AND BRAINSTORM: As you go about your daily life and business activities, identify and cultivate individuals who possess the requisite knowledge base, technical skills, energy, edge, and entrepreneurial experience that you will need to effectively and efficiently deliver your present and future objectives to work with you and have fun while doing it, as the saying goes, no man is an Island.Your mastermind network can as an advisory board to your business or project.
  • BELIEVE IN YOURSELF: Informed Self-belief is an essential requirement for any business owner/manager or project leader. This requires gathering information sufficient to understand the key elements of the project, the project drivers, the project environment, your internal resources, strengths and weaknesses and how your available and obtainable resources will enable you successfully achieve your objectives.  Provision should also be made for the consequences of your decisions or situations where events that are uncontrollable or unforeseen negatively affect your expected outcomes. Anytime you assume the responsibility to create something that had not existed before an opportunity to become a reality, you become accountable for your actions.
  • ALWAYS HAVE A PLAN ‘BAND BE READY TO START ALL OVER: Although we would always want to believe that all will be well, life sometimes happens. Sometimes, despite your best plans and efforts, your expected may not materialise. In such a situation, you may either take a breather, evaluate your mistakes and do it better, or where the cause of the failure was systemic (e.g a regulatory change, irreversible market evolutions, change in consumer tastes) it may be advisable to know when to cut your losses and jump ship or change your product or marketing strategy to fit the changing market.



Justice O.E Abang of the Federal High Court, Ikoyi, on Thursday 14th May, 2015 stopped further processes relating to the draft corporate governance code released by the Financial Reporting Council of Nigeria (FRCN) on April 15, 2015 with a 30-day window for stakeholders to comment on the 133-page document, ahead of a planned public hearing on May 19, 2015.

The presiding judge, at the hearing of the ex parte application for injunction brought by Timothy Adesiyan  and nine others against the Minister of Trade and Investment and three others , granted the applicants’ ex parte application and ordered that the defendants should maintain status quo and suspend further deliberations, considerations, proceedings, processes and all actions relating to the draft National Code of Corporate Governance (NCCG) 2015, pending the hearing of the motion on notice for injunction.

The judge heard the arguments of the plaintiffs’ counsel, Kemi Pinheiro (SAN) in favour of the ex parte application and thereafter gave a well-considered bench ruling wherein he granted the applicants’ ex parte application. Subsequently, the suit was adjourned to May 20, 2015, for hearing of the plaintiffs’ motion on notice for injunction.

BusinessDay had exclusively reported last week about the fears being expressed by business leaders and investors that the policy document could wield excessive powers over Nigeria’s already challenged private sector, following the deadline for public comments which expired yesterday. According to comments received exclusively by BusinessDay on conditions of anonymity, the NCCG, according to them, may swing the country from one extreme of weak corporate governance to another extreme of excessive regulation.

The NCCG is the government’s comprehensive response to the weak corporate governance environment in Africa’s largest economy, identified as a main cause of the 2008/2009 banking sector crisis. The document promises to harmonise existing codes in the banking, pension, insurance and other sectors into a unified code of rules for board compositions, audit processes, and shareholder protection, among others, which will be regulated by the Financial Reporting Council of Nigeria (FRC).However, business leaders say the convergence of the codes into a one-size-fits-all would miss out on industry specific details or contradict existing industry policies.

Senator Udo Udoma Faults Proposed National Code of Corporate Governance

culled from Thisday Newspaper

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A former Senator and the Chairman, UAC of Nigeria Plc, Senator Udoma Udo Udoma has criticised the proposed national code of corporate governance (NCCG), saying that the Financial Reporting Council of Nigeria (FRC) is trying to usurp the powers of other regulatory agencies. Udoma made this remark at the 2015 public lecture of Chartered Secretaries and Administrators of Nigeria(ICSAN) held in Lagos. Speaking on the theme: “Governance: The synergy between leadership and followership,” he argued that there is no one-size-fits-all approach to corporate governance, noting that ” the corporate governance rule you need for a major bank cannot be the same with what you require for a biscuit manufacturer or a company trading in sugar.” Udoma added: “I am surprised and puzzled by the current attempt being made by the FRC to come up with they call a universal code of corporate governance. What does that mean? I understand that they are even extending the rules to churches, mosques and other not-for-profit organisations. I think we are carrying this thing too far. “I am even at a loss to understand under what authority they are proceeding with that? Even if they have power to enforce corporate governance code, which is arguable, does that also give them the power to make the rules?

This is because, the power to enforce, does not automatically give you the power to regulate. If it is, the police would have taken over the power to make laws from the National Assembly.

He continues “I believe that the FRC is attempting to usurp the powers of other regulatory agencies. I am not sure it was the intention of the National Assembly to create the FRC to be the super regulator that all other regulators report to. In fact when I saw the draft, there are aspects of it that seem to be amending the Companies and Allied Matters Act (CAMA.). “CAMA provides that the board should have a chairman, a managing director and a board member, but they are saying that a board should have a chairman, a managing director and a senior independent board member, who is supposed to monitor the performance of the chairman. If they want to amend CAMA, they should know the process of amending CAMA.” Udoma further noted: “This is why when I was chairman of SEC and we were looking at corporate governance, we set out what we felt was the minimum and we recognised that various other regulators such as the Central Bank of Nigeria, will have tighter ones for banks and so on so forth. And that is a normal thing, you have the minimum one and within each industry, you have the tighter one”.

The Governor of the Central bank of Nigeria Mr. Godwin Emefiele seems to toe a different line, as he describes the proposed uniform Code of Corporate Governance being developed by the Financial Reporting Council of Nigeria (FRC)  as “a veritable tool in the quest to guarantee investment in the economy”.

Chairman, Lagos Chapter of the Chartered Institute of Bankers of Nigeria (CIBN), Mrs. Taiwo Ige opines that the NCCG would ease regulation; “We have always talked about corporate governance as being self-regulating. If you imbibe the culture of corporate governance, you will feel comfortable within yourself because you must have done what is expected of you. So, anybody can come and have a look at what you have done without you being afraid. So the harmonised code is going to curb corruption and enthrone best practice. It would align the nation with what is done globally,”.

On his part, Mr. Jide Iyanda of the Nigeria Deposit Insurance Corporation (NDIC), argues that the National Code of Corporate Governance would enhance investor confidence in Nigeria.

“The international community and investors would have confidence in the Nigerian economy and the perception about Nigeria will improve significantly. Nigeria can get it right only when things are done appropriately in both the private and public sectors,” Iyanda added.

Similarly, Mr. Kola Abdul, Managing Director/Chief Executive Officer, Brent Mortgage Bank and Vice Chairman at the CIBN Lagos branch ,, who notes that the private sector had over the years been focused on getting things right so as to ensure that they remain as going concerns, argues that the bane of the Nigerian economy had been the public sector.

“There is no public governance in the public sector and we lack ethics in that sector. So, if the government has woken up from the slumber, to create a common standard and acceptable policy for all sectors in the country, then it is a welcome development. But the challenge I have with this is that as Nigerians, we are always ahead of regulations. As we are today, I can tell you that there are people looking at the loopholes with a view to exploiting them. But I hope that with the new government in place, we can overcome that challenge,”

Long live Nigeria!


Pursuant to its statutory responsibility to develop principles and practices of corporate governance, the steering committee constituted by the Federal Government of Nigeria to develop a National Code of Corporate Governance (NCCG) for the country has finalised work on the draft document. The draft code was on the 15th of April 2015 published for comments from stakeholders for 30 days.

The Executive Secretary/Chief Executive Officer, Financial Reporting Council (FRC), Mr. Jim Obazee, disclosed to journalists in Lagos that the deadline for receiving comments on the draft NCCG is May 14th 2015, while a public hearing on the subject would be held on May 19th. The FRC Scribe pointed out that the federal government is aware that the issuance of a national code of corporate governance is a very important deliverable that can be used to enhance the country’s national competitiveness and socio-economic issues including corruption and lack of corporate independence.

Milton and Cross will examine the NCCG to determine whether it meets global best standards in Corporate Governance as well as analyzing the extent of its applicability to Nigeria’s unique business environment.

You may download the codes by following the links below:

Private Sector Code:

Public Sector Code:

Non Profit Organisation Code: bqcIt35R2dvc09QWXZscTQ/view?pli=1


Corporate governance has been defined by the Central Bank of Nigeria as the systems by which corporations (emphasis mine) are governed and controlled with a view to increasing shareholder value and meeting the expectations of the other stakeholders. This definition embodies the common misconception among organisations and regulators alike, that Corporate governance is reserved for corporations or companies listed on the stock exchange; nothing indeed could be further from the truth. Corporate governance operates to ensure proper decision making in organizations ranging from Ultra-high net worth companies to the little corner shop owned by a sole proprietor. It is the cornerstone upon which strong, sustainable organizations have been built.

Corporate governance deals with the rights and responsibilities of a company’s management, its directors (reference to Directors here is general, and includes all those undertaking the responsibility of being the governing mind of the organization), and various stakeholders such as employees and customers. A well developed code of corporate governance effectively harmonises the relationship between owners, managers and stakeholders of the target organizations; by mitigating friction between management and owners of organizations, the organization is positioned to make highly effective decisions, leading to improved profitability and/or market share.

The entrepreneur who embarks upon a new venture often remains the key operator in the venture long after the business has expanded beyond the technical or managerial competence of the promoting entrepreneur. This normally manifests in insider abuses arising from the pervasive influence of related parties and unfettered decision making powers. These abuses more often than not, lead to the demise of the organization.

How may this unfortunate state of affairs be averted?

The answer depends upon the organization and its structure. In most corporate organizations it is theoretically easy to separate the managerial and controlling functions especially as shareholders are not required to be directors. Furthermore, most contemporary corporate governance codes usually stipulate that a proportion of the Board of Directors be composed of Independent Non executive directors. In addition, many companies separate the positions of the Chairman of the Board of Directors and the Chief Executive in order to provide for checks and balances, preventing corporate autocracy. It is essential that these independents should not be vendors, suppliers, contractors or parties with hold interest in the company. In the event that any such conflict of interest arises, it is the duty of the director to promptly advise the Board of Directors of the facts and nature of the conflict of interest.

Empirical studies conducted by Gill, Sharma, Mand and Mathur revealed that a positive relationship exists between strong corporate governance systems and corporate cash flows; effectively, the stronger the corporate governance systems, the higher its investment returns and cash flows. When you clearly define corporate governance standards for your organization, you effectively mitigate the risk of corporate failure arising from technical or managerial incompetence, thereby positioning the organization for sustained growth and increased profitability.