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Home > Frequently Asked Questions > Parity Requirment for Water Project Loans  

Frequently Asked Questions: Parity Requirment for Water Project Loans

Title

Parity Requirment for Water Project Loans 

Program Area

Loans & Grants 

Specific Program

Water Project Loan Program 

CWCB Section

Finance 

Question

The CWCB may require a "parity certificate" before it will sign the loan contract. What is "parity" and how do I comply with this requirement?

Answer

If your organization has existing debt when the Board approves your loan, we will require you to submit a "parity certificate" prior to executing a loan contract. In financing situations, "parity" between two loans means that in the event of the borrower's default, the two lenders would divide the available assets on a pro-rata basis. In other words, neither lender would have a "first position" to attach the available assets of the default party without regard to the other lender. Accordingly, to secure a pro-rata share of a defaulting borrower's assets, the CWCB requires that you meet the parity requirements of your existing debt so that the CWCB will be on par with your existing loans. If we require a "parity certificate" from you, you must certify, through an independent certified public accountant, that you meet the parity tests contained in your existing loan agreements. Please see CWCB Financial Policy No. 6 for more information.
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Created at 6/30/2010 2:34 PM  by System Account 
Last modified at 6/30/2010 2:34 PM  by System Account