Pari-passu status of debt

following, agreement, statements, understand

Hi,

The following quote is from a company’s financial statements. The debentures mentioned in the quote was issued recently. However the company has other senior and unsecured debts that were issued 10-12 years back.

I am trying to understand:
1. the arrangements that have to be made to make a paper issued 10 years later to get the pari pass status with the paper issued 10 years back. How does the old lender agree to that?

2. What exactly (clause or agreement) makes a debt senior to another debt?

“The Debentures are subordinated to the senior indebtedness of the Company, but will rank pari passu with all other unsecured indebtedness of the Company.”

Thanks.

Windjam

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发表于 2011-7-11 19:03 | 只看该作者

"rank pari passu with" means "have the same seniority as"

so this new debt will rank at the same level as unsecured debts but below senior debts.

How does the old lender agree?
normally, the lender of the senior debt will have a clause that the company will have to get specific permission to have new debts ranked pari passu plus the lender will typically have secured all assets of the company legally, so if there is no more assets to secure.

In practice, the company will go to the lender (bank) and ask permission. A negotiation will ensue and the company have to give up sth to get this permission.

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