Pari Plus Financing
Pari Plus Financing is market shorthand for a liability-management structure in which new-money lenders obtain a pari passu claim at existing asset-owning entities plus an additional structurally senior or priority claim against other assets or entities, creating more than one recovery path.
Pari plus is related to the double dip
Both structures seek more than one source of creditor support.
A pari-plus transaction typically emphasizes that one of the new lender's claim paths sits pari with existing debt inside the operating group while another claim benefits from structural seniority or separately transferred assets.
The structure can avoid direct lien priming
If existing documents restrict creating a lien senior to first-lien debt but allow additional pari debt and permitted asset transfers, a borrower may be able to create the desired new-money economics without placing a formally senior lien on the old collateral.
That distinction can matter to Serta-style blocker analysis.
Trinseo helped popularize the label
Market commentary identifies Trinseo's 2023 financing as the transaction that inspired the term pari plus.
By 2026, restructuring and liability-management materials treat pari-plus structures as a recognized variation within the LMT toolkit.
Recovery still depends on asset value and claim validity
Two claim paths do not guarantee double recovery. The total available enterprise value, intercompany claim validity, guarantees, collateral, subordination and restructuring treatment determine actual recovery.
The second path can be worth much less than its face amount in distress.
Pari-plus economics can be illustrated with a two-claim recovery model
Assume new lenders provide $100 million through a pari-plus structure.
Inside the operating group, they hold a $100 million pari first-lien claim sharing with $500 million of existing first-lien debt. Outside that group, they also hold a structurally senior claim against assets worth $60 million.
If the outside assets fully support $60 million of recovery, only the remaining $40 million economic exposure depends on the pari claim inside the operating group.
Existing lenders, by contrast, have access only to the inside collateral pool.
This asymmetry explains the “plus.” The new lender is not necessarily senior on every asset. It has additional recovery support that existing pari lenders do not share, which can improve expected recovery materially in a downside scenario.
Common mistakes
Treating pari plus as identical to a conventional double dip It is a related but more specific structure.
Assuming the pari claim itself is senior The 'plus' usually comes from the additional structural or asset claim.
Assuming two claims mean twice the recovery Value and legal enforceability remain limiting factors.
Example
New lenders fund $200 million to NewCo. NewCo lends the proceeds to the operating borrower through a first-lien intercompany loan that ranks pari with existing first-lien debt, while the new lenders also hold a senior claim against NewCo assets transferred outside the old credit group. The lender therefore has a pari inside claim plus the outside structural claim.
Example
New lenders fund $200 million to NewCo. NewCo lends the proceeds to the operating borrower through a first-lien intercompany loan that ranks pari with existing first-lien debt, while the new lenders also hold a senior claim against NewCo assets transferred outside the old credit group. The lender therefore has a pari inside claim plus the outside structural claim.
Professional note
Draw the structure entity by entity. The phrase pari plus can sound like a single lien position, but the economics come from multiple claim paths located at different entities or collateral pools.
Related terms
- Pari Passu
Pari passu means that specified obligations rank equally with one another in a stated respect, such as right of payment or lien priority, rather than one being contractually junior to the other.
- Structural Subordination
Structural subordination is the priority disadvantage faced by a creditor of a parent or holding company when valuable assets and liabilities sit in subsidiaries that do not guarantee the parent debt.
- Double-Dip Financing
Double-dip financing is a liability-management structure designed to give new-money lenders two claim paths or sources of credit support against enterprise value, commonly through direct debt at one entity plus an intercompany receivable, guarantee or other claim against another part of the corporate group.
- Liability Management Transaction (LMT)
A Liability Management Transaction, or LMT, is a financing or restructuring transaction used to alter a company's debt obligations, liquidity, maturity profile, collateral or creditor priority, often outside a formal bankruptcy process.
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