Intercreditor Dynamics and Step-In Rights in Project Finance
Because a typical Project Finance deal involves a syndicate of commercial banks, export credit agencies (ECAs), and perhaps mezzanine lenders, the Intercreditor Agreement (ICA) is the primary governing document for lender relations. The ICA establishes the "Voting Rights" for different classes of debt. For example, "Fundamental Decisions"—such as changing the project’s scope or extending the loan maturity—usually require $100\%$ lender consent, while "Minor Waivers" may only require a "Majority Lender" vote ($66.7\%$).
A vital technical feature described in this document is Step-In Rights. These rights allow the lenders to bypass the SPV's management and "Step-In" to the project's key contracts (like the EPC or O&M agreements) if a default occurs.
If the original sponsor goes bankrupt, the lenders can use Step-In Rights to appoint a new operator to finish construction or continue operations, thereby preserving the asset's value. This is backed by Direct Agreements between the lenders and the project's counter-parties. The document also details "Cure Periods," which give the lenders a window of time to fix a default before a contractor can terminate their contract with the SPV. This "Standstill" period is the ultimate protection for lenders, ensuring that the project remains a "Going Concern" even during periods of extreme financial or operational stress.