A Parent Company Guarantee (PCG) is a financial commitment made by a parent company to guarantee the financial obligations of its subsidiary or affiliate. In essence, the parent company pledges to fulfill the obligations of the subsidiary if it fails to do so itself. This type of guarantee provides additional security to creditors or counterparties dealing with the subsidiary, as it demonstrates the financial strength and support of the parent company.
The parent company agrees to provide financial support to the subsidiary in case of default on its obligations, such as loan repayments, lease payments, or performance guarantees.