Upstream Guarantee


DEFINITION of 'Upstream Guarantee'

A contingent liability on a subsidiary's financial statements in which the subsidiary guarantees its parent company's debt. Upstream guarantees are performed to get better financing terms for the parent or to initiate financing.

BREAKING DOWN 'Upstream Guarantee'

An upstream guarantee is often performed in a leveraged buyout situation in which the parent company takes on a substantial level of debt to acquire another firm. Without an upstream guarantee, the offer may not even be able to take place, as there may not be enough collateral on the parent company's balance sheet.

  1. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  2. Contingent Liability

    A potential obligation that may be incurred depending on the ...
  3. Leveraged Buyout - LBO

    The acquisition of another company using a significant amount ...
  4. Contingent Guarantee

    A guarantee of payment made by a third party, known as the guarantor, ...
  5. Subsidiary

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

    A company that controls other companies by owning an influential ...
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  1. Can working capital be negative?

    Working capital can be negative if a company's current assets are less than its current liabilities. Working capital is calculated ... Read Full Answer >>
  2. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  3. Does working capital include prepaid expenses?

    The calculation for working capital includes any prepaid expenses that are due within one year, since such prepaid expenses ... Read Full Answer >>
  4. Does working capital include short-term debt?

    Short-term debt is considered part of a company's current liabilities and is included in the calculation of working capital. ... Read Full Answer >>
  5. Do dividends affect working capital?

    Regardless of whether cash dividends are paid or accrued, a company's working capital is reduced. When cash dividends are ... Read Full Answer >>
  6. Do prepayments provide working capital?

    Prepayments, or prepaid expenses, are typically included in the current assets on a company's balance sheet, as they represent ... Read Full Answer >>

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