What is a Keepwell Agreement?
How Does a Keepwell Agreement Work?
For example, let's assume that Company XYZ is a subsidiary of Company ABC. Company XYZ has had a tough year making widgets but wants to expand into the Chinese markets and needs loan for less than 15% interest. At that rate, the loan payments would significantly threaten Company XYZ's viability.to build a factory. It wants to borrow the from a bank but is a significant lending risk and can't get a
To compensate for this, Company ABC and Company XYZ sign a 10-year keepwell agreement. In the agreement, Company ABC agrees to keep Company XYZ solvent and financially stable for the next 10 years. This is a relief to the bank, which now knows that if Company XYZ stumbles in the China endeavor, Company ABCstep in and make sure the loan payments are made.
Why Does a Keepwell Agreement Matter?
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
I have a friend who thought it would be a great idea to buy sports memorabilia as an investment. The stock market...Read More →
When a person asks you, "How did the market do today?" it's safe to assume that he or she is looking for a quote on the most...Read More →
Are you looking to put some excitement back into your portfolio? Or, like many of us, are you frustrated with the limited number of choices you have as you prepare for retirement? About 90,...Read More →