Comfort (Keepwell) Letters are considered to be non-legally binding, given only to provide a lender with comfort as to the intention of the parent company of a group. If the intention is to create a loose level of l legal obligation on the parent company, suggest to use a guarantee.
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The document titled 'Letter of Comfort (Keepwell) to Bank / Financial Institution' is a formal letter that serves as a written assurance from a company to a bank or financial institution regarding its financial stability and ability to meet its obligations. This letter is typically requested by the lender as a form of security or reassurance when providing a loan or credit facility to the borrower.
The importance of this document lies in its ability to provide confidence to the lender that the borrower's parent company or major shareholder is committed to supporting the borrower financially. It assures the lender that the borrower will have the necessary financial resources to fulfill its obligations under the loan agreement.
The document consists of several sections, each serving a specific purpose:
1. Account Information: This section includes details about the account, such as the account holder's name, address, and other relevant contact information.
2. Letter of Comfort: This section contains the main body of the letter, where the issuer confirms their ownership of a certain percentage of the borrower's shares and their commitment to not reduce or dispose of their shareholding. It also acknowledges their familiarity with the loan agreement's terms and their policy of closely supervising their affiliated companies, including the borrower.
3. Jurisdiction Clause: This section specifies the jurisdiction under which any disputes arising from the loan agreement will be resolved.
4. Account Sign Block: This section includes the signature block of the account holder, along with their job title and company name.
Overall, this document plays a crucial role in establishing trust and confidence between the lender and the borrower, ensuring that the borrower has the necessary financial backing to fulfill their obligations.
Step-by-step guidance for using the 'Letter of Comfort (Keepwell) to Bank / Financial Institution':
1. Fill in the Account Information: Enter the relevant account details, including the account holder's name, address, and other contact information.
2. Draft the Letter of Comfort: In this section, clearly state the ownership percentage of the borrower's shares held by the issuer and their commitment to not reduce or dispose of their shareholding. Also, acknowledge familiarity with the loan agreement's terms and the issuer's policy of closely supervising their affiliated companies.
3. Specify the Jurisdiction Clause: Determine the jurisdiction under which any disputes arising from the loan agreement will be resolved and include it in this section.
4. Sign the Document: The account holder should sign the document in the designated Account Sign Block, providing their job title and company name.
5. Review and Submit: Carefully review the completed document to ensure accuracy and coherence. Make any necessary revisions before submitting it to the lender or financial institution.
By following these steps, you can effectively utilize the 'Letter of Comfort (Keepwell) to Bank / Financial Institution' to provide the necessary assurance and support to the lender, strengthening the borrower's position and increasing the likelihood of obtaining the desired loan or credit facility.