Upstream Guarantee

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Contingent Liability

    A potential obligation that may be incurred depending on the ...
  2. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  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. Parent Company

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

    A company whose voting stock is more than 50% controlled by another ...
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Personal Finance

    Breaking Down The Balance Sheet

    Knowing what the company's financial statements mean will help you to analyze your investments.
  3. Options & Futures

    Pinpoint Takeovers First

    Use these seven steps to discover a takeover before the rest of the market catches on.
  4. Options & Futures

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  5. Fundamental Analysis

    How do I calculate dividend payout ratio from a balance sheet?

    Understand what the dividend payout ratio indicates and learn how it can be calculated using the figures from a company's balance sheet statement.
  6. Investing Basics

    What is the difference between a fixed asset and a current asset?

    Discover the difference between fixed assets and current assets and the value of each to a company. Learn the category and where to record each asset.
  7. Investing Basics

    What is the difference between tangible and intangible assets?

    Discover the difference between tangible assets and intangible assets and the types of assets that are in each. Additionally, learn where these are recorded.
  8. Fundamental Analysis

    Should companies break out accounts receivables into subledgers?

    Find out why every company that sells on credit should break down its accounts receivable into individual customer subsidiary ledgers, or subledgers.
  9. Fundamental Analysis

    What metrics can be used to evaluate companies in the forest products sector?

    Understand some of the best financial and equity valuation measurements that can be utilized to evaluate companies in the forest products sector.
  10. Fundamental Analysis

    What's a Prospectus?

    The Security and Exchange Commission (SEC) requires that any company raising money from potential investors through the sale of securities must file a prospectus with the SEC and then provide ...

You May Also Like

Hot Definitions
  1. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  2. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  3. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  4. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  6. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
Trading Center