Letter Of Moral Intent

AAA

DEFINITION of 'Letter Of Moral Intent'

A letter to a bank from a parent company whose subsidiary is applying to borrow money from that bank. While not legally binding, the letter indicates the parent company's intention to continue financially supporting its subsidiary (to not sell it or shut it down) in an attempt to reassure the lender that making the loan would not be an overly risky decision.

INVESTOPEDIA EXPLAINS 'Letter Of Moral Intent'

While a letter of moral intent serves as reassurance to a bank that a parent company is on-side with a loan application, it does not serve as a formal guarantee by the parent for the subsidiary. This letter also shows that the parent company is aware of its subsidiary having requested the loan and approves.

RELATED TERMS
  1. Financial Guarantee

    An non-cancellable indemnity bond that is backed by an insurer ...
  2. Bank Confirmation Letter - BCL

    A letter confirming that a line of credit has been secured from ...
  3. Comfort Letter

    A letter given to organizations or persons of interest by external ...
  4. Parent Company

    A company that controls other companies by owning an influential ...
  5. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  6. Collateralized Loan Obligation ...

    A security backed by a pool of debt, often low-rated corporate ...
Related Articles
  1. Analyzing A Bank's Financial Statements
    Fundamental Analysis

    Analyzing A Bank's Financial Statements

  2. Breaking Down The Balance Sheet
    Personal Finance

    Breaking Down The Balance Sheet

  3. Sneaky Subsidiary Tricks Can Cloud Financials
    Investing Basics

    Sneaky Subsidiary Tricks Can Cloud Financials

  4. Investing In Oil And Gas UITs
    Mutual Funds & ETFs

    Investing In Oil And Gas UITs

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center