TLDR:
Pari passu is a Latin term meaning “equal footing,” used in finance to describe securities or obligations that have equal rights, with no one party having priority over another in distributions or payments.
Pari Passu in Bankruptcy and Liquidation
In debt contexts, pari passu provisions ensure that multiple creditors holding the same class of debt are treated equally — no single creditor receives priority or preferential payment over another holder of the same instrument. This principle became notable in the Argentina sovereign debt restructuring litigation (NML Capital v. Argentina), where courts interpreted pari passu clauses to require Argentina to pay holdout creditors in full whenever they paid restructured debt holders, creating significant complications for the country’s debt restructuring.