single-purpose entity


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single-purpose entity (SPE)

A limited liability company or corporation that holds title to real estate and owes money to a lender as the result of a mortgage on the property, but which has no other assets or liabilities.The SPE will usually lease the property to another company, comprised of the same owners.That second company then executes leases to tenants,hires a management company or provides for necessary services,and generally incurs all liabilities associated with managing the property.This structure is usually required by a lender as a condition of extending a mortgage loan. It insulates the collateral from claims of other creditors. If the second company must file for bankruptcy because it is not able to pay creditors, that does not stop the lender from foreclosing unless the SPE also files for bankruptcy.If the SPE files for bankruptcy,it is much easier for the lender to lift the automatic stay and proceed with foreclosure because it has the only vote for issues such as approving a plan of reorganization under Chapter 11 (see bankruptcy).If there were many creditors,consisting of the janitorial service,utilities,tenants,and others,then those other creditors could force the mortgage lender to acquiesce in a plan of reorganization that is not in the lender's best interests.That process is called a cram-down.With only one creditor,the mortgage lender,there is no chance of a cram-down.(Do not confuse with a special-purpose entity, also abbreviated as SPE,which is much broader than a single-purpose entity.) Also called a single-asset entity (SAE).

References in periodicals archive ?
FCSC is a non-profit, single-purpose entity that owns, operates and leases back its assets to Walton County (the county).
The corporation is a non-profit, single-purpose entity overseen by Walton County (the county) and is the sole provider, with one exception, of essential water and sewer services within certain geographic boundaries of the county (the small area of Inlet Beach receives water from a non-profit provider).
The court facilities consist of the first 25 floors as a separate and legally distinct condominium unit of a 30-floor mixed-used condominium to be built by 330 Jay Street Associates, LLC, the landlord, which is a single-purpose entity.
The court facilities will consist of the first 25 floors as a separate and legally distinct condominium unit of a 30-floor mixed-used condominium to be built by 330 Jay Street Associates, LLC, the landlord, which is a single-purpose entity.
Additionally, bankruptcy risk does exist since the corporation is a non-profit entity, but is somewhat mitigated by the corporation's status as a single-purpose entity overseen by Walton County (the county) as the sole provider of essential water and sewer services.
BFL is structured as a bankruptcy-remote, single-purpose entity.
Centragas is structured as a single-purpose entity with bankruptcy remote provisions that provide protection from possible bankruptcy proceedings at Enron.

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