Use of comfort letters in financing transactions

A comfort letter is a written statement of support for a third party. Comfort letters may not be legally binding, however, even where there is a lack of a legal obligation, the provider of a comfort letter may still honor the arrangement for commercial reasons.

This guidance note explains the use of a comfort letter, including that it is quasi-security, and the many different names that such a document may bear. This guidance note contains examples where comfort letters are commonly used in financing transactions, and explains the reasons for their use. Importantly, this guidance note outlines for legal practitioners the typical terms of a comfort letter, and answer the often asked question of “is a comfort letter enforceable?”.

See The use of comfort letters in financing transactions.