Comfort Letters – non-binding alternative to a parent guarantee

Non-Binding Comfort Letter

CO.G&I.12

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

Comfort letters are generally used as alternatives to guarantees. They are usually provided by a parent company to a lender where the parent company is unable (or unwilling) to provide a guarantee to the lender in respect of a loan the lender has made to one of the parent’s subsidiaries. This may be because the parent is restricted from doing so for constitutional reasons or because its own borrowings prevent it from giving guarantees.

The parent may however be prepared instead to make certain written assurances to the lender that:

• The borrower is its subsidiary;

• The parent will maintain its shareholding in the borrower whilst the loan is still outstanding; and

• The borrower can comply with its obligations under the loan.

Comfort letters can be binding or non-binding. This comfort letter is intended to be non-binding and clearly states as such. Neither a consideration nor a governing law clause has therefore been included. Such a letter may still carry moral and reputational force against the parent should the borrower default. It may be advisable to seek independent legal advice if you are intending to use a non-binding comfort letter.

This sub-folder also contains a Binding Comfort Letter which can be accessed here. 

Alternatively for a parent company wishing to give a guarantee, the guarantee agreements in our Guarantees sub-folder should be used.

Optional phrases / clauses are enclosed in square brackets. These should be read carefully and selected so as to be compatible with one another. Unused options should be removed from the document.

This Non-Binding Comfort Letter is in open format.

Once you have purchased access to the appropriate document folder click on the “Download Document” button below. You will be asked what you want to do with the file. It is recommended that you save the document to a location of your choice prior to viewing.

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