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. Comfort Letter

    A letter given to organizations or persons of interest by external ...
  3. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  4. Parent Company

    A company that controls other companies by owning an influential ...
  5. Bank Confirmation Letter - BCL

    A letter confirming that a line of credit has been secured from ...
  6. Collateralized Loan Obligation ...

    A security backed by a pool of debt, often low-rated corporate ...
RELATED FAQS
  1. What role do SPVs / SPEs play in public-private partnerships?

    When created and used in conjunction with a public-private partnership (PPP), a special purpose vehicle (SPV) -- sometimes ... Read Full Answer >>
  2. After Enron, are SPVs / SPEs considered good business practice?

    A special purpose vehicle (SPV), also known as a special purpose entity (SPE), is a separate entity created by a company ... Read Full Answer >>
  3. Is there a limit to the number of SPVs / SPEs a company can create?

    There are no fixed, definable legal limits on the number of affiliate companies that a corporation can create. Special purpose ... Read Full Answer >>
  4. What is the most typical holding in an SPV?

    Special Purpose Vehicles, or SPVs, have been extensively used as a means of securitizing property-based assets. Since the ... Read Full Answer >>
  5. How do businesses decide whether to do FDI via green field investments or acquisitions?

    When businesses decide to expand their operations to another country, one of the more important dilemmas they can face is ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Analyzing A Bank's Financial Statements

    A careful review of a bank's financial statements can help you identify key factors in a potential investment.
  2. Personal Finance

    Breaking Down The Balance Sheet

    Knowing what the company's financial statements mean will help you to analyze your investments.
  3. Investing Basics

    Sneaky Subsidiary Tricks Can Cloud Financials

    Use consolidated financial statements to uncover a parent company's true performance.
  4. Investing Basics

    What is the Shadow Banking System?

    The shadow banking system is composed of financial institutions that do not take deposits in the tradition sense.
  5. Investing

    How Special Purpose Entities Help Fight Risk

    A special purpose entity, sometimes called a special purpose vehicle, is a legal entity created for one very limited, particular task. Typically, SPEs are subsidiaries of a larger corporation.
  6. Personal Finance

    Countries With The Largest Shadow Markets

    These nations have the largest informal economies relative to their respective GDPs.
  7. Investing Basics

    Some Thoughts On The Shadow Market

    The "shadow market" is a broad-based moniker with both positive and negative connotations.
  8. Mutual Funds & ETFs

    Investing In Oil And Gas UITs

    Unit investment trusts provide direct exposure to the energy sector, fueling better returns.
  9. Options & Futures

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  10. Taxes

    The Basics Of REIT Taxation

    The unique tax advantages offered by these investments can translate into superior yields.

You May Also Like

Hot Definitions
  1. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  2. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  3. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  4. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  5. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  6. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!