Special-Purpose Entity

A financing technique in which a company decreases its risk by creating separate partnerships, rather than subsidiaries, for certain holdings and solicits outside investors to take on the risk. In order to qualify as a special-purpose entity, whose financial results are not carried on the company's books, the unit must meet strict accounting guidelines. Compare to subsidary.

Special Purpose Vehicle

A subsidiary of a company that attempts to isolate risk from the parent company by maintaining its assets and liabilities on a completely separate balance sheet. It can be used as a counterparty in swap transactions, or the parent company can finance a project through an SPV that would put the parent company in danger of bankruptcy if the project does not perform well. During the Enron scandal, SPVs developed notoriety because Enron hid much of its debt in SPVs.

special-purpose entity (SPE)

Usually a limited liability company formed in order to separate profits,losses,and risks from the corporation that created it.The most spectacular example of the use of special-purpose entities was Enron, which used SPEs to siphon off losses and “cook the books.” The use of SPEs is legitimate and necessary in many circumstances, though. (Do not confuse with single-purpose entity, also abbreviated as SPE, which is more specialized and is typically a lender requirement before it will extend mortgage financing on large projects.) Also called special-purpose vehicle.

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References in periodicals archive

There are legal costs associated with the formation of the special-purpose entity. Dealing with a rating agency and credit enhancement also cost money.

Securitization

A servicer, often the bank that originated and sold the asset, is contracted by the special-purpose entity to collect payments on the loans or leases in the pool of assets, to transfer funds to the investors and to foreclose if necessary.

Securitization: new data reveal exposures, help regulators

Because of the inherent flexibility in forming and operating a special-purpose entity, there are several other ownership considerations to address in its formation.

ISC tax issues

Portfolio lenders often fall short in securitizable loan documentation in the areas of opinions, representations and warranties, junior loans and special-purpose entity requirements.

Conduit whole-loan buyer beware. (Executive essay)

The concept of defeasance of a mortgage arises from the needs of today's mortgage loan securitization industry, where lenders originate mortgage loans to transfer them to a special-purpose entity that issues bonds backed by the cash flow of the mortgages (a Trust).

Defeasance: Now a viable option in New York State

If the owner of a special-purpose entity goes into bankruptcy on unrelated debt, the lenders hope the separate entity will remain separate and not become part of the bankruptcy court's jurisdiction.

Special-purpose entities and tax-free exchanges

The notes will be issued by JIC's offshore special-purpose entity, Xingsheng (BVI) Company Limited (XSBVI).

Fitch Rates China Jianyin Investment's Proposed USD Notes 'A+(EXP)'

TTM Sukuk is a special-purpose entity formed to issue Islamic bonds with maturities ranging from five to 15 years to meet the funding needs of Trans Thai-Malaysia (Thailand) Ltd, a 50/50 joint venture between Malaysia's national oil company Petroliam Nasional Berhad (Petronas) and Thai peer PTT Public Company (BAK:PTT).

-MARC rates TTM Sukuk's MYR600m Sukuk Murabahah at AAAIS

RAK Capital is a Cayman-based special-purpose entity established for this transaction.

RAK Capital's upcoming Sukuk issue assigned 'A' rating

The exchange accommodator will most likely set up a special-purpose entity (usually an SMLLC) to hold the parked property for the taxpayer until the exchange is complete.

Disregarded entities held in high regard: single-member LLCs in like-kind exchanges

In addition, if a special-purpose entity has been formed to hold the 1% interest (e.g., an S corporation), its tax returns need to be filed as well.

Classification of single-member LLCs to be clarified under final "check-the-box" regulations

The notes were issued by China Great Wall's offshore special-purpose entity, China Great Wall International Holdings III Limited (GWIII).

Fitch Ratings assigns final rating to China Great Wall Asset Management