What Is Pari-Passu?

Pari-passu 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 pari-passu occurs during bankruptcy proceedings: When the court reaches a verdict, the court regards all creditors equally, and the trustee will repay them the same fractional amount as other creditors và at the same time.Bạn vẫn xem: Pari passu là gì

Pari-passu may describe certain clauses within a variety of financial vehicles, such as loans and bonds, which are debt instruments issued by companies to lớn raise cash. Often, these clauses are in place lớn ensure the associated financial hàng hóa is functioning as an equal to all similar others.

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Pari-passu is a Latin phrase meaning "equal footing."In finance, "equal footing" means that two or more parties lớn a financial contract or claim are all treated the same.Pari-passu is common in bankruptcy proceedings as well as debts such as parity bonds in which each tiệc ngọt gets the same amount. Wills & trusts can also assign an in pari-passu distribution where all the named parties share the assets equally.

How Pari-Passu Works

In finance, the term pari-passu can refer lớn loans, bonds, or classes of shares that have sầu equal rights of payment or equal seniority. Pari-passu can describe any instance where two or more items can clayên ổn equal rights as the other.

Equity Shares

Within the marketplace, all new equity shares (called a secondary offering) have sầu equal rights with existing shares or those that were previously issued. In that sense, the shares are pari-passu. Pari-passu can apply lớn comtháng stoông chồng shares, for example, so that each shareholder has equal rights to claims for dividends, voting rights, & the liquidation of assets.


However, pari-passu does not apply khổng lồ creditors such as banks. If a company has debt or loans outstanding, there's a pecking order in which certain creditors are repaid first in the event of bankruptcy and liquidation of the company's assets. As a result, pari-passu would not apply khổng lồ creditors and shareholders since the creditors would be paid before the shareholders.

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Wills & Trusts

Similar Products

Often, identical items will be pari-passu, coming with the same benefits and costs of the other items with which they are grouped. In other situations, items may only be pari-passu in one or only certain aspects. For example, two competitors may offer two functionally identical widgets for the same price with superficial differences such as color. These widgets are functionally pari-passu but may be aesthetically different.

Pari-Passu and Unsecured Debts

Since an asmix backs secured debts, they are often not fully equal to the other obligations held by the borrower. Since there is no asmix supporting unsecured debts, there are greater instances of borrower default or bankruptcy. Further, a provider of unsecured financing may enact clauses that prsự kiện a borrower from taking part in certain activities, such as the promising of assets for another debt to lớn keep a position with regard khổng lồ repayment.

A parity bond refers lớn two or more bond issues with equal rights of payment or equal seniority lớn one another. In other words, a parity bond is an issued bond with equal rights lớn a clalặng as other bonds already issued. For example, unsecured bonds have equal rights in that coupons may be claimed without any particular bond having priority over another. Therefore, unsecured bonds would be referred to lớn as parity bonds with each other. Similarly, secured bonds are parity bonds with other secured bonds.

Example of Pari-Passu

A parity bond stands in contrast khổng lồ a junior lien or a senior lien bond. A junior lien bond, also called a subordinate bond, has a subordinate clayên ổn to lớn pledged revenue as compared lớn a senior lien bond, which is also called a first lien bond. Unsecured debts are subordinate bonds compared khổng lồ secured debts.