Parent guarantee
A guarantee from the operating group of its financing subsidiary's debt. Its scope (full, limited or bad acts only) is one of the main credit differences between GPU loans.
How it works
A parent guarantee is a promise by a group's parent company to pay the debts of a subsidiary if the subsidiary does not. It gives lenders a claim against the wider group, not just the borrowing entity.
In GPU and data centre deals
Many GPU financings are made to ring-fenced subsidiaries, so whether the parent guarantees the debt is a key term. Some deals have a full guarantee, some a guarantee limited in amount or time, and some only a bad-acts guarantee covering fraud and similar misconduct. The choice affects pricing, and it matters most if the group gets into difficulty and the subsidiary's assets are worth less than the debt.
What gets negotiated
- Full, capped or bad-acts only
- When the guarantee falls away, for example after a contract milestone
- The guarantor's own financial covenants, if any
- How the guarantee ranks against the parent's other debt
In the filed deals
CoreWeave's DDTL 5.0 and 5.5 carry full parent guarantees; IREN's Hardware 3 uses limited parent guarantees.
For in-house counsel
Parent guarantee in the filed documents
Where the term turns up in filed contracts and what is market, for the lender’s or the borrower’s side. Previews are open; the full text is free with InfraCompute Weekly.
- Contract library: Why the parent guarantee springs, and what makes it springWhy would a parent guarantee only spring later, and which events should trigger it?
- Contract library: Parent guarantees and security for compute dealsWill the AI lab’s own loan let it guarantee a data centre lease or a GPU financing?
- What’s market: Remarketing and RVG when a customer rejects GPUsWhat happens to the loan if the customer validly rejects a tranche of GPUs?
- The legal desk for in-house counselContract library, issues lists, checklists and English law notes.
Related terms
Explanatory definition, not a statement that a particular transaction contains this term or a substitute for its contractual definition.
← Browse all definitions