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. Parent Company

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

    A company whose voting stock is more than 50% controlled by another ...
  4. Bank Confirmation Letter - BCL

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

    A letter given to organizations or persons of interest by external ...
  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. Countries With The Largest Shadow Markets
    Personal Finance

    Countries With The Largest Shadow Markets

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. 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 ...
  6. 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 ...
Trading Center