commitment letter is a letter (also called a letter of offer) in which a lender sets out the terms on which it is prepared to lend money to the lender. It is generally accompanied by a term sheet setting out the terms of the loan. If the letter is then signed by the borrower and returned to the lender it forms the mandate.
USA
A letter agreement in which a lender sets out the terms on which it is prepared to lend money to the borrower. It is generally accompanied by a term sheet which sets out the terms of the loan.
In leveraged buyouts by private equity firms, this letter is commonly known as a debt commitment letter, to distinguish it from an equity commitment letter. The lenders typically address the debt commitment letter to the newly formed acquisition vehicle and commit to it to provide the debt financing at the closing of the transaction on satisfaction of certain conditions. The debt commitment letter is usually delivered to the seller (in a stock or asset sale) or target company (in a merger) when the acquisition agreement is executed.
For further information see Practice Note, Commitment Letters Overview: Lending (www.practicallaw.com/1-381-0450).
See also
Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010.