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Hi Mike,
I do not understand the concept of ‘pari pass inter se’ as applied to debentures. I have listened to the lecture and tried a simple google search. could you help clarify it?
particularly i do not understand what is meant by reference to a ‘issued in a series’, for example one website says a subsequent ‘series’ cannot overtake a previous ‘series’ in preference.
also date of registration does give one debenture a preference over another, right? this is also confusing the concept for me.
Thank you in advance for your help.
The expression is “pari passu inter se” and literally means “equally amongst themselves”
Imagine borrowing money not from a bank (a single debenture) but from thousands of people (a series) in multiples of $100
Just because your name is Aardvark and mine is Zyzzylx, that doesn’t make you any better than me simply because yours is the first name in the alphabetical list and mine is the last. We are all equal, those of us that have lent the company money through debentures issued in a series … so we rank pari passu inter se – equally amongst ourselves
A company has basically two choices when it is looking to borrow money:
from a single lender (like a bank), or
from “the public” by borrowing money in $100 multiples and issuing a series of loan notes
The company may find that it needs to borrow more money (say) 3 years later, so issues another series of debentures for further monies lent by the public
That subsequent ‘series’ cannot overtake the previous ‘series’ in terms of preference, for instance, in a liquidation
Where two series of debentures are issued within a short time of each other, the first one to be registered (not the first one to be issued) ranks in preference to the series that is registered second
Better?
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