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. 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 ...
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