Pari Passu

Pari Passu. Paripassu is a Latin phrase meaning “equal footing” that describes situations where two or more assets securities creditors or obligations are equally managed without preference An example of Video Duration 1 min.

Uses and Applications of The PariPassu PrinciplePariPassu and Financial InstrumentsPractical ExampleAdditional ResourcesLending The term paripassu is popular in the lending and credit space More specifically it is a financing agreement that allows multiple creditors to obtain a secured loan with equal claims on an asset Bankruptcy Also paripassu is an important concept in bankruptcyBankruptcyBankruptcy is the legal status of a human or a nonhuman entity (a firm or a government agency) that is unable to repay its outstanding debtsproceedings Upon reaching a verdict under the principle a court would regard all creditors as equals Thus a trustee of the insolvent company would pay the creditors based on the paripassu principle and creditors of the company would receive equal portions of the liquidation in accorda Asset management Paripassu can also apply to the management of assets or securities The principle would apply to the management of assets or securities in the sense that the assets or securities would be managed with equal preference or a preference weighted on the value or amount invested in either the asset or securities Paripassu can be applied to a myriad of financial instruments or contractual relationships Firstly it can be applied to equity Though there are multiple classes of equities within each class the paripassu principle holds With common voting shares each share is equal in the sense that they hold a voting right and are equal in case of a liquidation With preferred sharesPreferred SharesPreferred shares (preferred stock preference shares) are the class of stock ownership in a corporation that has a priority claim on the company’s assets over common stock shares The shares are more senior than common stock but are more junior relative to debt such as bonds each share is equal in the sense that they each hold an equal preference with dividend distributions and a preference (ahead of common shares) in the case of a liquidation Regarding common shares they are equal in liquidation however it is important to notice that the paripassu principle does not span across differe Assume a company wants to raise capital through issue stocks and bonds The company issues common shares and two bonds which sit within the same tranche of debt with the same seniority and rights of payment However they are different in terms of yield coupon ratesCoupon RateA coupon rate is the amount of annual interest income paid to a bondholder based on the face value of the bond maturity and payment periodicity After raising the capital the company becomes insolvent and must liquidate According to the paripassu rule since the two bonds are within the same tranche hold the same rights of payments and are equally senior to each other the paripassu principle holds However the principle would not hold between the bonds and the stock since the bonds would hold a priority of payment to the stock CFI offers the Certified Banking & Credit Analyst (CBCA)®Program Page CBCAGet CFI&#39s CBCA™ certification and become a Commercial Banking & Credit Analyst Enroll and advance your career with our certification programs and coursescertification program for those looking to take their careers to the next level To keep learning and advance your career the following resources will be helpful 1 Debt CovenantsDebt CovenantsDebt covenants are restrictions that lenders (creditors debt holders investors) put on lending agreements to limit the actions of the borrower (debtor) 2 Common vs Preferred SharesCommon vs Preferred SharesPotential investors who are looking to acquire a stake or ownership in a company can choose to purchase between common vs preferred shares Companies 3 InsolvencyInsolvencyInsolvency refers to the situation in which a firm or individual is unable to meet financial obligations to creditors as debts become due Insolvency is a state of financial distress whe.

Pari passu Practical Law

Pari passu means “equal in right of payment” The pari passu principle means that all unsecured creditors in insolvency processes such as administration liquidation and bankruptcy must share equally any available assets of the company or individual or any proceeds from the sale of any of those assets in proportion to the debts due to each creditor.

PariPassu Overview, Uses and Applications, Example

The meaning of PARI PASSU is at an equal rate or pace.