Comfort Letters

What comfort is a comfort letter?

Jan 2014 If you are doing business with any company you want to know they’ll be good for their obligations and won’t go bust on you. If you’re dealing with a subsidiary of a large successful company you might be prepared to overlook the subsidiary’s weak-looking financial position (assuming you’ve checked it out in the first place) provided that you are given what is known as a ‘comfort letter’ from the parent company. But are comfort letters worth the paper they’re written on? Shouldn’t you be asking for a proper guarantee instead? Check out this case from last year...