What Is A Pari Passu Agreement

Pari-passu is a Latin expression that is generally translated as „on an equal footing.“ It is often used with debt obligations and bankruptcy proceedings. But it can also be used in other financial arrangements, and how it is used depends on the context. As a general rule, pari passu clauses are used to indicate that multiple parties have identical payment and filing rights. The term pari-passu can also be used in other funding contexts in which different parties have the same right or right to seniority (for example. B, wills, trusts, bonds, different class of shares). With regard to real estate, the term has a similar meaning, especially for commercial real estate (CRE) in the debate over cascade distributions (also known as the order in which payments and profits from an investment property are distributed to investors). In this context, pari-passu is often used in conjunction with the term anrata, but words have slightly different meanings. The percentage refers to the proportional distribution of profits and commitments, and pari-passu refers to the rank and seniority of the commitments, i.e. they are „on an equal footing“. Pari-passu is a Latin term that means „on an equal footing“ and means that different parties have the same rank and payment rights in a financial agreement. A pari passu clause in a loan agreement is generally used for unsecured debt (unsecured loans,. B for example a house or a car). The pari passu clause stipulates that the borrower has the same right of repayment as all other creditors of the borrower.

For example, when a company issues bonds, it is a corporate share. When issuing pari passu bonds, it means that all bondholders have the same rights to that obligation. A bondholder cannot claim seniority for another simply because he bought his bonds a few days earlier. Instead, each bondholder has the same rank and is paid at the same time. This provides some protection for unsecured debtors. Even if a debtor is unable to repay all of his debt liabilities after the liquidation of his assets, creditors do not have to worry that they will end up empty-handed, while another creditor recovers his credit in full. At least all creditors with Pari Passu loans will receive a portion of the liquidated investment cake. In the European Union, a retroactive collective clause, adopted by the Greek government with the support of the ECB and the IMF, allowed, in the wake of the Greek sovereign debt crisis, to impose a 70% loss on the debtor (who also controlled the courts), more than 75% of whom had voted in favour of the reduction. In this case, pari passu means that all private investors will be treated the same. [6] Pari passu is a Latin expression that literally means „with the same step“ or „on an equal footing“.

It is sometimes translated as „equal tidy,“ [1] „hand in hand,“ „with the same force,“ or „move together,“ and by enlargement, „just,“ „without bias.“ [2] Pari-passu – in Latin for „equal“ – is a financing agreement that gives several lenders an equal right to the assets used to secure a loan. If the borrower is unable to meet the payment terms, the assets can be sold and each lender receives an equal share of the proceeds at the same time. This differs from most agreements involving more than one lender, which generally establish a repayment hierarchy in which some lenders are given priority in terms of date and amount of payment.