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In a financing, a commitment to provide funds or purchase securities on agreed terms before placement with others.
A firm-commitment securities underwriter bears the risk of holding securities it cannot sell as planned, subject to the agreement's conditions. A best-efforts intermediary instead seeks buyers without the same commitment to purchase the unsold amount. Fees and pricing reflect the role. In a loan, underwriting involves assessing repayment capacity, collateral and terms before deciding whether to commit funds.
Suppose an intermediary firmly commits to buy a J$100 million issue and sells only J$80 million by the planned date. Under the simplified commitment, it retains J$20 million to place later, bearing the associated price risk. A best-efforts mandate might leave the issuer with a smaller completed offer or an unmet minimum instead. The contract determines the outcome, not the title alone.
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