Administrative priority creditors do not rank ahead of a secured creditor with respect to its security interest, but generally are afforded a first priority (see chap. V, paras. 45 47 and 66) that ranks ahead of ordinary unsecured creditors and any statutory priorities, for example, taxes or social security claims.

The super priority ranks ahead of administrative creditors.

The insolvency law should establish the priority that may be accorded to post commencement finance, ensuring at least the payment of the post commencement finance provider ahead of ordinary unsecured creditors, including those unsecured creditors with administrative priority.

Where the insolvency law establishes the level of priority that generally can be given, for example, an administrative priority, court approval may not be required.

12. Recognizes the need for attaching higher priority to social aspects in the Heavily Indebted Poor Countries Debt Initiative

6. Affirms that debt repayments should not take precedence over the basic rights of the people of debtor countries to food, shelter, clothing, employment, health services and a healthy environment

IMF requested that the Government desist from repaying any debt until the entire quantum of debt is determined and rescheduled and the repayments are prioritized. (See table 7.

In those cases where there are no unencumbered assets, or no excess value in already encumbered assets, that the debtor can offer as security or with which the debtor can satisfy an administrative expense priority claim, the debtor has limited options.

Job priority

In addition, it was noted that priority under the draft Convention gave a creditor only the right to be paid before other creditors that were subsequent in the line of priority.

Services Preference Order

Other approaches involve classifying intra group transactions differently from similar transactions conducted between unrelated parties (e.g. a debt may be treated as an equity contribution rather than as an intra group loan), with the consequence that the intra group obligation will rank lower in priority than the same obligation between unrelated parties.

Proposals were made to replace the words quot secured claims quot and quot rights in rem quot , with reference to quot privileged claims quot , quot preferred claims quot or other expressions with a similar meaning.

Debt write offs should be considered in the first instance.

A further approach provides that the priority will be recognized in a subsequent liquidation, but will not necessarily be accorded the same level of and may rank, for example, after administrative claims relating to the costs of the liquidation or pari passu with administrative expenses.

These priority tasks include the following

Note to the Working Group The commentary will provide examples of exceptions, such as post commencement priority financings and privileged claims.

With respect to the question of establishing equal treatment between foreign and local creditors quot of the same priority quot , it was noted that definitions and classes of priority of creditors varied greatly from country to country and that it would not be feasible to require that the court of the enacting State should apply to foreign creditors the priority rules of their respective foreign laws.

Priority of the security right over the rights of competing claimants

When obtaining credit or incurring indebtedness is essential to maximizing the value of assets, and the credit or finance is not otherwise available as an administrative expense or is to be incurred outside the ordinary course of business, the court may authorize that credit or debt to be incurred as an administrative expense, to be afforded super priority ahead of other administrative expenses or to be supported by the provision of security on unencumbered or partially encumbered assets.

In some cases, such a priority is afforded on the basis that the new credit or lending is extended to the insolvency representative, rather than to the debtor, and thus becomes an expense of the insolvency estate.

Nevertheless, the claims of foreign creditors other than those concerning tax and social security obligations shall not be ranked lower than identify the class of unsecured non preference claims, while providing that a foreign claim is to be ranked lower than the unsecured non preference claims if an equivalent local claim (e.g. claim for a penalty or deferred payment claim) has a rank lower than the unsecured non preference claims . quot

Operations and global priorities

IV. Operational priorities of recovery

(h) Recognize existing creditors rights and establish clear rules for ranking of priority claims.

For starters, when it comes to public debt, there is a big difference between the gross and net figures. While Japan s gross public debt, for example, is a massive 246 of GDP, the net figure, accounting for intra government debts, is 127 of GDP.

Some insolvency laws provide that new lending may be afforded some level of priority over existing secured creditors, (sometimes referred to as a priming lien ).

It has other objectives and other priorities.

Priorities in programmes and services

A more desirable approach may be to provide that creditors obtaining priority for new funding will retain that priority in any subsequent liquidation.

We must prioritize the cancellation of the public debt of the heavily indebted poor countries, the least developed countries, and the low and medium income developing countries.

These priority tasks include the following

Priority between the assignee and the insolvency administrator or creditors of the assignor

29. Paragraph 192 suggests that debt service need not be a high priority for a developing country.

(b) Provide a temporal event for ordering priority among secured creditors and between a secured creditor and other classes of competing claimants.

Strategic communications services thematic priorities

To implement the enhanced programme of debt relief for the heavily indebted poor countries without further delay and to agree to cancel all official bilateral debts of those countries in return for their making demonstrable commitments to poverty reduction and

It was noted, however, that one of the reasons the mechanism had failed to gain support was that IMF could not be regarded as a neutral arbitrator, given its preferred creditor status.

One is the priority payment of commercial debts before any other sources of capital are paid, i. e. before payments are made to other creditors or dividends are distributed to equity investors or project sponsors.

84. It was suggested that the following should be addressed the question of the ranking of creditors, the priority between the insolvency administrator and creditors, legal mechanisms for reorganization of the insolvent debtor, special rules designed to ensure the continuity of the public service in case of insolvency of the project company and provisions on avoidance of transactions entered into by the debtor shortly before the opening of the insolvency proceedings.

As between assignees of the same receivable from the same assignor, the priority of the right of an assignee in the assigned receivable is determined by the order in which notification of the respective assignments is received by the debtor. However, an assignee may not obtain priority over a prior assignment of which the assignee had knowledge at the time of conclusion of the contract of assignment to that assignee by notifying the debtor.

Financing for development was a priority.

Reiterates its call upon developed countries, as expressed in the Millennium Declaration, to complete the enhanced programme of debt relief for the Heavily Indebted Poor Countries Initiative and to ensure that it is fully financed, and in this regard underscores the importance of full creditor participation in contributing their share to implementing the enhanced Heavily Indebted Poor Countries Initiative

The implicit preferred creditor status is based on central bank practices that establish that the lender of last resort is the last in and first out. It is this seniority that enables the IMF to limit the risk of default so that it can lend to countries at reasonable interest rates when nobody else will.

First, it aims to ensure that obligations are fairly and regularly met when a debtor becomes financially insolvent. Thus, it seeks to protect the lawful rights of both creditors and debtors.