Pari Passu Clause Clause Samples

Pari Passu Clause. The Borrower shall commit: · To not grant any securities, guarantees or charges to third parties guaranteed by an asset, on the chart of accounts, without making the Bank pari passu in equal rank. Nevertheless, the present clause is not applicable for guarantees or securities that the Borrower grants to cover financing in the acquisition of an asset thenceforth they shall act exclusively on the asset in question and only guarantee the financing of said asset; · To immediately notify the Bank in writing, of all commitments “to do” or “to refrain from”, entering into or having entered into a contract with any Credit Institution and whose non-fulfillment or violation might result as a consequence in a lapse in the compulsory repayment of the obligation of the Loan for which this commitment has been entered into, and would be beneficial to the Bank, in the event where the commitment that had been entered into, that is to say, the same commitment (which had not already have been collected under these presents), that is to say, rights or satisfactory equivalent advantages; · To immediately notify the Bank and in writing, of the execution by any creditor, in particular, any Financial or Credit Institution, any revocation in terms or all cases of Compulsory Prepayment relating to any Loan, credit, or any other financial assistance, granted to the Client since this action would have as a consequence calling into question any commitment of the Borrower under these presents.

Pari Passu Clause. The pari passu clause is a standard provision included in unsecured debt commitments. Pari passu is a Latin phrase that literally means "in equal step". In other words, pari passu means in equal ranking. The purpose of the pari passu clause is to avoid the borrower subordinating the facility (or its creditors) vis-à-vis other monetary obligations or creditors. Breach by the borrower of the pari passu clause does not give the right to the lenders to receive pro –rata payments and should not be construed as an equal payment provision. The pari passu clause just predicates the equal ranking of unsecured creditors. The pari passu clause is both a representation and a covenant since the borrower will represent that the lenders under the facility have the same ranking among themselves and among other unsecured debt obligations. As it has been explained, representations are claims or statements made by the borrower to induce the lender to lend. Lenders rely on the representations when assessing the risk and evaluating the features of the credit. Therefore, it is essential that the borrower discloses all of its outstanding debt, especially any senior debt. On the other hand, as a covenant, the pari passu clause works as a negative covenant preventing the borrower from creating any preferred debt and shall be interpreted also with the permitted liens exceptions and permitted indebtedness. In any event, the breach of the pari passu clause, whether as a misrepresentation or false assertion, or covenant (creation of senior debt or the subordination of the unsecured debt), could trigger an event of default, and grant the lenders the right to exercise the acceleration of the facility and its termination. The pari passu clause is not a sharing clause (pro-rata share of payments) and borrowers should consider this when negotiating this clause. It is recommended to use standard provisions validated by the International Capital Market Association (ICMA) since a variation of the clause could give rise to other interpretations of the clause with unexpected consequences, especially in the context of sovereign debt. A standard pari passu clause reads: “the borrower shall ensure that at all times any unsecured and unsubordinated claims of lender against it under the credit facility rank at least pari passu among the lenders and with the claims of all its other unsecured and unsubordinated creditors except those creditors whose claims are mandatorily preferred by law.” The clause...