underwrite

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Underwrite

To guarantee, as to guarantee the issuer of securities a specified price by entering into a purchase and sale agreement. To bring securities to market.

Underwriting

1. The process of placing a new issue with investors. Underwriting involves the issuing company using one or (usually) more companies who are each responsible for placing a certain amount of the new issue. The underwriting firms contact potential investors to gauge interest and sell the issue. Underwriters guarantee the price for a certain number of shares of the new issue. See also: Bracketing, Oversubscribed, Undersubsribed.

2. Due diligence a lender conducts to ensure that a potential borrower is able to repay the loan.

underwrite

To assume the risk of securities' sale by purchasing the securities from the issuer for resale to the public. Investment bankers often assume this underwriting function in order to guarantee that the issuer will receive all the funds needed from the sale. See also best-efforts basis, freed up, hot issue, investment banker, peg, standby underwriting.

underwrite

(1) To evaluate the risk of a situation,as in loan underwriting to determine the borrower's financial strength,ability to repay the debt in the event of an interruption of cash flow,and willingness to repay the debt as evidenced by the borrower's credit score or credit history. (2) To guarantee a sale, such as an investment banker who underwrites the sale of securities and will purchase any that do not sell on the open market. (3) To assume liability, such as an insurance company that underwrites a policy.