A Virginia Security Interest Subordination Agreement is a legal document that establishes the priority of security interests in a collateral when multiple creditors have competing claims. This agreement outlines the rights and obligations of each party involved and ensures the proper order of repayment in case of default or bankruptcy. In Virginia, there are different types of Security Interest Subordination Agreements, each serving a specific purpose: 1. First Lien Subordination Agreement: This agreement occurs when a creditor holding a first lien on a collateral agrees to subordinate its interest to another creditor who holds a subsequent lien. By subordinating their claim, the first lien creditor acknowledges that the subsequent lien holder will be repaid first in case of default. 2. Second Lien Subordination Agreement: This agreement is the opposite of the first lien subordination agreement. Here, a creditor who holds a subsequent lien agrees to subordinate its interest to a creditor with a prior lien. By doing so, the second lien creditor recognizes that the prior lien holder has priority in receiving repayment before them. 3. Intercreditor Subordination Agreement: This agreement is used when two or more creditors hold security interests in a borrower's collateral. It establishes the rights and priorities of each creditor in case of default or bankruptcy. The agreement specifies the order of repayment and any conditions or limitations on the subordination of one creditor's interest to another. 4. Mezzanine Debt Subordination Agreement: This agreement typically occurs in the context of financing arrangements involving debt and equity. It subordinates the claims of mezzanine debt lenders (those providing capital with both debt and equity characteristics) to senior lenders who have first priority on the borrower's assets in case of default. This agreement protects the interests of the senior lenders and provides a clear hierarchy of repayment. In summary, a Virginia Security Interest Subordination Agreement is a crucial legal document that ensures the proper order of repayment for creditors with competing claims on a borrower's collateral. With various types of subordination agreements, creditors can establish their priorities and protect their interests in accordance with Virginia state laws.