What document formalizes the preliminary relationship between an issuer and its lead underwriter before the underwriting agreement is executed?
- AThe comfort letter
- BThe registration statement
- CThe selling agreement
- DThe letter of intent (engagement letter)✓ Correct answer
Why D — The letter of intent (engagement letter)
The letter of intent (or engagement letter) is signed early in the process and establishes the preliminary terms of the underwriter's engagement, including the type of offering, the expected role of the underwriter, expense reimbursement provisions, and indemnification. The letter of intent is typically non-binding with respect to the actual underwriting commitment, as the binding underwriting agreement is not signed until pricing night. The engagement letter sets the framework for the working relationship between the issuer and underwriter.
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