Binding Comfort Letter

This Binding Comfort Letter is a form of “comfort” offered by a parent company to a lender in respect of a loan made by the lender to the parent’s subsidiary.

Comfort letters are generally used as alternatives to guarantees. They are commonly provided where the parent company is unable (or unwilling) to give a guarantee in respect of a loan made to one of its subsidiaries, for example because of constitutional restrictions or because the parent’s own borrowings prevent it from giving guarantees.

What does Binding Comfort Letter do?

It gives the lender binding written assurances from the parent company in relation to the borrower and the loan, including assurances that:

• The borrower is the parent’s subsidiary
• The parent will maintain its shareholding in the borrower while the loan remains outstanding
• The borrower can comply with its obligations under the loan

When should you use Binding Comfort Letter?

Use this template where a parent company is not providing a formal guarantee but is prepared to provide binding assurances to support a lender’s loan to its subsidiary.

Comfort letters can be binding or non-binding. This template is intended to be binding, but independent legal advice should be considered if you intend to rely on a binding comfort letter (rather than a formal guarantee) as to its potential enforceability.

Choose the right version

If you need a non-binding comfort letter instead, use:

• Non-Binding Comfort Letter

If the parent company is willing and able to give a guarantee, use the guarantee templates in this collection, for example:

• Loan Guarantees Documents

Binding Comfort Letter is part of Corporate. Just £38.50 + VAT provides unlimited downloads from Corporate for 1 year.