Also known as "letter of comfort" or "solvency opinion".
Comfort letters can be used by lenders, such as banks as solvency opinions on whether a borrower can meet the payment obligations of a loan. They are opinions and are not guarantees that the underlying company will actually remain solvent.
Comfort letters can also be used by underwriters as their obligation to carry out "reasonable investigation" into offerings of securities. These letters of comfort will ensure that the reports provided conform to the generally accepted accounting principals (GAAP). This helps the underwriter better understand aspects of the financial data which might not otherwise be reported such as changes to financial statements and unaudited financial reports.
Investment dictionary. Academic. 2012.
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