Pari-passu

Pari-passu is a Latin phrase that means "on an equal footing." In finance, it is used to describe two or more obligations that have equal priority. This means that if one of the obligations is paid, the other must also be paid.

Pari-passu clauses are often included in loan agreements to ensure that all of the lenders are treated equally. For example, if a borrower defaults on a loan, the lenders will share in the proceeds of any foreclosure sale on an equal basis.

Pari-passu clauses can also be used to protect investors in a bond issue. For example, if a bond issuer defaults on its payments, the bondholders will receive their money in the same order, regardless of the type of bond they hold.

Pari-passu clauses are important because they help to ensure that all parties involved in a financial transaction are treated fairly. They can also help to prevent disputes and litigation.

Here are some additional examples of how pari-passu clauses are used in finance:

• In a mortgage loan, the pari-passu clause ensures that all of the mortgage holders are treated equally in the event of a foreclosure.
• In a bond issue, the pari-passu clause ensures that all of the bondholders receive their money in the same order, regardless of the type of bond they hold.
• In a joint venture agreement, the pari-passu clause ensures that all of the partners share in the profits and losses equally.

Pari-passu clauses are an important tool for protecting the rights of investors and lenders. They can help to ensure that all parties involved in a financial transaction are treated fairly.