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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Step-in rights

What are step-in rights, and why do project lenders insist on them?

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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

Step-in rights let a borrower's lenders, or a party they nominate, take over the borrower's place in a key contract, such as a construction contract, a concession or a long-term offtake agreement, when the borrower defaults. They are usually granted in a direct agreement signed by the lenders, the borrower and the counterparty, under which the counterparty must give the lenders notice and time to cure before it terminates. They matter most in project finance, where the debt is repaid from a handful of contracts, and a contract terminated without warning can take the repayment with it.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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