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 ?
Debt service constitutes a high 23% of total spending, which is not unusual for a single-purpose entity and is partially offset by rapid principal amortization, with 88% of debt maturing over the next 10 years.
Centragas is a single-purpose entity that was formed by Enron Corp.
Fitch notes these characteristics are not uncommon for a single-purpose entity created to operate a self-supporting project.
The project, however, is a single-purpose entity and the project's debt is non-recourse to the sponsors.
which was sold on November 30, 2010, to FCFI Acquisitions LLC, a single-purpose entity owned by several investment funds managed by Fortress Investment Group, LLC.
a single-purpose entity wholly owned by AmSouth Bank, owns 93 acres of land in Hoover known as the AmSouth Riverchase Park.
These small, largely rural communities formed a single-purpose entity focused on a specific goal, and in the process demonstrated that governments can get the job done.
FCSC is a non-profit, single-purpose entity that owns, operates and leases back its assets to Walton County (the county).

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