Comfort Letter

Definition:

In the context of an offering of securities, a letter produced by an issuer’s External Auditors to verify financial information contained in the offering document. It will also typically provide that there have been no Material changes to Financial Statement(s) and Financial Reports since their provision for inclusion in the offering document. In an SEC-registered offering or a Regulation S Offering, the Comfort Letter is delivered to the underwriters as part of their Due Diligence. In a Rule 144A Offering, the Comfort Letter is delivered to the initial purchasers and helps establish a Due Diligence Defense. The Comfort Letter is delivered on the signing of the Underwriting Agreement.

In the context of a Credit Agreement, a letter provided by a parent company in relation to the borrowings of a subsidiary. The Comfort Letter is not intended to be binding and is, in fact, typically provided where the parent company is unwilling to provide a Guarantee.

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