381:
company, hence the performance of the new entity will not be affected by the ups and downs of the originating entity. The SPE will be subject to fewer risks and thus provide greater comfort to the lenders. What is important here is the distance between the sponsoring company and the SPE. In the absence of adequate distance between the sponsor and the new entity, the latter will not be an SPE but only a
43:
1263:
1253:
200:, if the SPE securitization vehicle were owned or controlled by the bank whose loans were to be secured, the SPE would be consolidated with the rest of the bank's group for regulatory, accounting, and bankruptcy purposes, which would defeat the point of the securitization. Therefore, many SPEs are set up as
291:
Property investing: Some countries have different tax rates for capital gains and gains from property sales. Letting each property be owned by a separate company can mean a lower tax bill. These companies can then be sold and bought instead of the actual properties, effectively converting property
232:
whose payments come from a pool of loans. However, to ensure that the holders of the mortgage-backed securities have the first priority right to receive payments on the loans, these loans need to be legally separated from the other obligations of the bank. This is done by creating an SPE, and then
191:
is one such strategy. In addition, they are commonly used to own a single asset and associated permits and contract rights (such as an apartment building or a power plant), to allow for easier transfer of that asset. They are an integral part of public private partnerships common throughout Europe
195:
A special-purpose entity may be owned by one or more other entities and certain jurisdictions may require ownership by certain parties in specific percentages. Often it is important that the SPE is not owned by the entity on whose behalf the SPE is being set up (the sponsor). For example, in the
178:
Normally a company will transfer assets to the SPE for management or use the SPE to finance a large project thereby achieving a narrow set of goals without putting the entire firm at risk. SPEs are also commonly used in complex financings to separate different layers of equity infusion. Commonly
388:
A good SPE should be able to stand on its feet, independent of the sponsoring company. This does not always happen in practice. One of the reasons for the collapse of the Enron SPE was that it became a vehicle for furthering the ends of the parent company in violation of the prudential norms of
380:
Like a company, an SPE must have promoter(s) or sponsor(s). Usually, a sponsoring corporation hives off assets or activities from the rest of the company into an SPE. This isolation of assets is important for providing comfort to investors. The assets or activities are distanced from the parent
242:
Asset transfer: Many permits required to operate certain assets (such as power plants) are either non-transferable or difficult to transfer. By having an SPE own the asset and all the permits, the SPE can be sold as a self-contained package, rather than attempting to assign over numerous
436:(IFRS), the relevant standard is IAS 27 in connection with the interpretation of SIC12 (Consolidation—Special-Purpose Entities). For periods beginning on or after 1 January 2013, IFRS 10 Consolidated Financial Statements supersedes IAS 27 and SIC 12.
667:
287:
Regulatory reasons: A special-purpose entity can sometimes be set up within an orphan structure to circumvent regulatory restrictions, such as regulations relating to nationality of ownership of specific
522: For example, it is quite common for tanker fleets to have each tanker owned by a separate special-purpose entity to try to avoid group liability in relation to widely drawn anti-pollution laws.
422:
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236:
Risk sharing: Corporates may use SPEs to legally isolate a high risk project/asset from the parent company and to allow other investors to take a share of the risk.
635:
433:
636:"Short-seller Andrew Left warned investors of Evergrande's looming insolvency nearly 10 years ago — and was banned from trading in Hong Kong as a result"
409:, which declared bankruptcy in 1994. Several executives of the company were found guilty of securities fraud, served prison sentences, and paid fines.
429:
that sets out the consolidation treatment of these entities. There are a number of other standards that apply to different transactions with SPEs.
308:
60:
618:
175:. A formal definition is "The Special Purpose Entity is a fenced organization having limited predefined purposes and a legal personality".
486:
481:
31:
258:(Itanium) processor architecture, they created a special-purpose entity which owned the intellectual technology behind the processor.
107:
126:
79:
1134:
171:) created to fulfill narrow, specific or temporary objectives. SPEs are typically used by companies to isolate the firm from
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997:
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502:
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188:
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schemes which have, as their main goal, the avoidance of tax or the manipulation of financial statements. The
967:
957:
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897:
837:
1208:
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460:
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327:
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459:, a special purpose vehicle intended to promote trade with Iran without using the US dollar and evade
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provided by an administration company to ensure that there is no connection with the sponsor.
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721:
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553:
542:"Special Purpose Entities in Megaprojects: empty boxes or real companies? Literature Review"
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284:
case is possibly the most famous example of a company using SPEs to achieve the latter goal.
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30:"Special purpose company" redirects here. For the pooled investment vehicle, see
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Special-purpose entities were one of the main tools used by executives at
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To enable several businesses, often occupying different positions in the
239:
Finance: Multi-tiered SPEs allow multiple tiers of investment and debt.
842:
228:
loans (or other receivables). For example, a bank may wish to issue a
625:, section 2, published on 18 January 2018, accessed on 21 August 2024
456:
450:
426:
540:
Sainati, Tristano; Brookes, Naomi; Locatelli, Giorgio (2016-09-19).
246:
To maintain the secrecy of intellectual property: For example, when
604:
591:
401:, in order to hide losses and fabricate earnings, resulting in the
741:
445:
398:
326:(FASIT), a defunct entity used for securitization of any debt for
281:
255:
247:
649:
425:, a number of accounting standards apply to SPEs, most notably
220:
Some of the reasons for creating special-purpose entities are:
356:
36:
453:(FASB ruling on consolidation of variable interest entities)
413:
has also been accused of using off book SPE to hide debt.
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sale gains into capital gains in order to pay less tax.
311:(REMIC), used for the pooling and securitization of
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1033:
881:
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687:
67:. Unsourced material may be challenged and removed.
590:Gorton, Nicholas S.; Souleles, Gary (March 2005).
233:transferring the loans from the bank to the SPE.
192:which rely on a project finance type structure.
467:Irish Section 110 Special Purpose Vehicle (SPV)
335:Irish Section 110 Special Purpose Vehicle (SPV)
324:financial asset securitization investment trust
276:Financial engineering: SPEs are often used in
661:
592:"Special Purpose Vehicles and Securitization"
187:strategies unavailable in the home district.
155:; or, in some cases in each EU jurisdiction,
8:
434:International Financial Reporting Standards
367:for the purpose of reducing or eliminating
1262:
1252:
768:
668:
654:
646:
337:(S110 SPV), the largest SPV in the EU for
224:Securitization: SPEs are commonly used to
603:
127:Learn how and when to remove this message
532:
309:real estate mortgage investment conduit
7:
389:corporate financing and accounting.
65:adding citations to reliable sources
487:Special purpose private equity fund
482:Special-purpose acquisition company
32:Special-purpose acquisition company
25:
1261:
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489:, similarly named business term
163:) is a legal entity (usually a
52:needs additional citations for
27:Type of legal entity in finance
1048:Debtor-in-possession financing
167:of some type or, sometimes, a
1:
579:European PPP Expertise Centre
498:Structured investment vehicle
204:with their shares settled on
161:financial vehicle corporation
988:Staggered board of directors
596:NBER Working Paper No. 11190
407:Towers Financial Corporation
353:real estate investment trust
1105:Accretion/dilution analysis
147:; or, in Europe and India,
1304:
1068:Leveraged recapitalization
558:10.1177/875697281704800205
546:Project Management Journal
317:mortgage-backed securities
271:public-private partnership
179:created and registered in
29:
1247:
1239:Valuation using multiples
1224:Sum-of-the-parts analysis
1194:Modigliani–Miller theorem
1053:Dividend recapitalization
868:Secondary market offering
1257:List of investment banks
1172:Free cash flow to equity
998:Super-majority amendment
923:Management due diligence
863:Seasoned equity offering
503:Variable interest entity
472:Off-balance-sheet entity
230:mortgage-backed security
76:"Special-purpose entity"
968:Shareholder rights plan
958:Post-merger integration
928:Managerial entrenchment
898:Contingent value rights
838:Initial public offering
328:asset-backed securities
149:special-purpose vehicle
1110:Adjusted present value
973:Special-purpose entity
811:Direct public offering
781:At-the-market offering
461:sanctions against Iran
208:and with professional
141:special-purpose entity
1125:Conglomerate discount
619:National Audit Office
403:Enron scandal of 2001
278:financial engineering
265:, to contract with a
18:Single-purpose entity
1147:Economic value added
1142:Discounted cash flow
61:improve this article
732:Senior secured debt
417:Accounting guidance
254:started developing
169:limited partnership
1267:Outline of finance
1179:Market value added
1162:Financial modeling
1120:Business valuation
1043:Debt restructuring
821:Follow-on offering
806:Corporate spin-off
764:(terms/conditions)
681:investment banking
383:subsidiary company
359:designation for a
202:'orphan' companies
196:context of a loan
1288:Corporate finance
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1199:Net present value
1184:Minority interest
1115:Associate company
1091:
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1058:Financial sponsor
978:Special situation
948:Pre-emption right
938:Minority discount
848:Private placement
747:Subordinated debt
702:Exchangeable debt
689:Capital structure
677:Corporate finance
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16:(Redirected from
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1135:Weighted average
1063:Leveraged buyout
918:Drag-along right
816:Equity carve-out
773:Equity offerings
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183:, SPEs allow
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78: –
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72:Find sources:
66:
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56:
55:
50:This article
48:
44:
39:
38:
33:
19:
1209:Real options
1025:Tender offer
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885:acquisitions
873:Underwriting
858:Rights issue
761:Transactions
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552:(2): 55–73.
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59:Please help
54:verification
51:
983:Squeeze-out
953:Proxy fight
883:Mergers and
796:Bought deal
727:Senior debt
623:PFI and PF2
411:Evergrande
365:real estate
267:public body
263:value chain
1229:Tax shield
1189:Mismarking
993:Stock swap
943:Pitch book
913:Divestment
791:Bookrunner
712:Pari passu
527:References
355:(REIT), a
346:Investment
226:securitize
181:tax havens
87:newspapers
1204:Pure play
1097:Valuation
963:Sell side
826:Greenshoe
566:114169162
493:Stichting
421:Under US
210:directors
117:July 2009
1282:Category
1035:Leverage
1013:Takeover
908:Demerger
893:Buy side
440:See also
243:permits.
1018:Reverse
1003:Synergy
843:Pre-IPO
831:Reverse
752:Warrant
427:FIN 46R
288:assets.
101:scholar
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457:Instex
451:FIN 46
432:Under
393:Abuses
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89:
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742:Stock
562:S2CID
510:Notes
505:(VIE)
446:Enron
399:Enron
297:Types
282:Enron
273:deal.
269:in a
256:IA-64
248:Intel
108:JSTOR
94:books
679:and
423:GAAP
315:for
250:and
216:Uses
80:news
600:doi
554:doi
357:tax
333:An
157:FVC
153:SPV
145:SPE
63:by
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