Definition
Pari passu (Latin for 'equal footing') means securities or creditors rank equally in claims on assets. If a company defaults, pari passu creditors receive proportional recovery. In bond documentation, it ensures no other debt will have senior claim. It's crucial for understanding creditor hierarchy in distressed situations.
Example
Two bond series both have pari passu clauses, meaning neither has priority over the other in bankruptcy recovery.
FAQ
What is Pari Passu?
Legal term meaning equal ranking among creditors or securities.
Why is Pari Passu important?
Pari Passu helps investors evaluate fixed income and make more informed decisions.