UCC Filing Procedures for Protecting Customer Owned Injection Moulding Tools
Protect customer injection molds by filing UCC-1 protective bailments and securing bank subordination waivers before placing steel at a supplier facility.
Intercreditor Agreement
Meaning
Contractual arrangements between two or more creditors define their respective rights and priorities concerning the assets of a common debtor. An intercreditor agreement is used when a moulder has one loan for raw material purchases and another for heavy machinery. This document specifies which lender has the first claim to the proceeds if a specific extrusion line is sold.
It governs the relationship between the parties but does not change the debtor’s underlying obligation to pay.
Lien Subordination
Formal ranking of claims ensures that the primary lender receives payment before any secondary creditors. Through an intercreditor agreement, a junior lender agrees not to take enforcement action against the moulding shop without the consent of the senior lender. This coordination prevents a single small creditor from forcing a liquidation that destroys the value of the entire enterprise.
Dispute Prevention
Clear rules for asset disposal reduce the likelihood of litigation between financial institutions. An intercreditor agreement outlines the exact steps for handling insurance payouts after a fire or the sale of obsolete tooling. It creates a predictable environment for lenders to provide the capital necessary for plant expansion.
Payment Waterfall
Revenue from the sale of inventory follows a specific sequence of distribution among the participating creditors.