Definition of Comfort letter:
Governmental affairs: Federal- or state- governments assurance (to the lender or supplier of a public agency or enterprise) that it will support the agency in timely settlement of its obligations.
Banking: Informal letter from a bank indicating its willingness to support a customer with a short-term loan, if and when required. It is not a letter of commitment.
The comfort letter does not make a legally enforceable commitment but conveys the ability of the other party to fulfill the terms of the agreement under discussion.
A comfort letter is a business document that is intended to assure the recipient that a financial or contractual obligation with another party can and will be met. The sender is often an independent auditor or accountant.
Corporate affairs: Parent-firms letter, issued to reassure a subsidiary-firms lender or supplier, that it would support the subsidiary in case of financial difficulties. Specific terminology used in the letter determines whether such assurance constitutes a binding contract or only a moral obligation. A comfort letter, however, does signify that the loan request is authorized, is in order, and that the parent firm will keep a careful eye on the entire transaction. Also called letter of comfort, it may also be issued by a government to back up the obligations of its agencies.
How to use Comfort letter in a sentence?
- Such letters may be sent by auditors, accounting firms, or parent companies.
- A comfort letter assures the recipient of the soundness of an individual or company it is considering doing business with. .
- A comfort letter does not contain any legally enforceable promises.
Meaning of Comfort letter & Comfort letter Definition