Letter of comfort
ESG & GovernanceA letter in which a company reassures a lender about another entity's ability or intention to repay a loan.
A letter of comfort is usually weaker than a formal guarantee, but depending on its wording and on side arrangements, it can expose the company that issues it to the borrower's debt. In the Essel group case, SEBI alleged that a letter of comfort allowed a bank to use Zee Entertainment's deposits against loans to other group companies. Read the notes on contingent liabilities and related-party guarantees for such arrangements.
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