Letter of Comfort
A non-binding statement from a parent firm or entity indicating support.
Detailed Description
Letter of Comfort
What is the main function of a Letter of Comfort?
The main function is to provide assurance to lenders or creditors about the financial support of a parent company for its subsidiary.
Is a Letter of Comfort legally binding?
No, it is not legally binding and serves as an informal assurance.
In what situations are Letters of Comfort typically used?
They are commonly used in loan agreements, leasing arrangements, and financial dealings involving subsidiaries.
What are the risks associated with a Letter of Comfort?
The risks include its lack of enforceability and potential misunderstandings about the issuer's commitment.
Should companies seek legal advice when using a Letter of Comfort?
Yes, it is advisable to seek legal counsel to understand its implications and avoid misunderstandings.