Special Purpose Vehicle/Entity - SPV/SPE

Special Purpose Vehicle/Entity - SPV/SPE
1. Also referred to as a "bankruptcy-remote entity" whose operations are limited to the acquisition and financing of specific assets. The SPV is usually a subsidiary company with an asset/liability structure and legal status that makes its obligations secure even if the parent company goes bankrupt.

2. A subsidiary corporation designed to serve as a counterparty for swaps and other credit sensitive derivative instruments. Also called a "derivatives product company."

Thanks to Enron, SPVs/SPEs are household words. These entities aren't all bad though. They were originally (and still are) used to isolate financial risk.

A corporation can use such a vehicle to finance a large project without putting the entire firm at risk. Problem is, due to accounting loopholes, these vehicles became a way for CFOs to hide debt. Essentially, it looks like the company doesn't have a liability when they really do. As we saw with the Enron bankruptcy, if things go wrong, the results can be devastating.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Special Purpose Entity — SPE An organization or entity established as a vehicle for *off balance sheet financing. The use of SPEs played a major role in the *Enron corporate governance scandal, and as a consequence the topic has attracted the attention of *accounting… …   Auditor's dictionary

  • Collateralized debt obligation — Financial markets Public market Exchange Securities Bond market Fixed income Corporate bond Government bond Municipal bond …   Wikipedia

  • commercial mortgage-backed securities — (CMBS) International mortgage backed securities which are backed, that is funded by and secured over, a portfolio of mortgage loans secured on commercial properties. The principal revenue stream to the special purpose vehicle which will be used… …   Law dictionary

  • commercial mortgage-backed security — commercial mortgage backed securities (CMBS) International mortgage backed securities which are backed, that is funded by and secured over, a portfolio of mortgage loans secured on commercial properties. The principal revenue stream to the… …   Law dictionary

  • CMBS — commercial mortgage backed securities (CMBS) International mortgage backed securities which are backed, that is funded by and secured over, a portfolio of mortgage loans secured on commercial properties. The principal revenue stream to the… …   Law dictionary

  • PIK loan — A PIK Loan is a type of loan which typically does not provide for any cash flows from borrower to lender between the drawdown date and the maturity or refinancing date, not even interest or parts thereof (see mezzanine loan), thus making it an… …   Wikipedia

  • Thomas Aquinas — Aquinas redirects here. For other uses, see Aquinas (disambiguation). Thomas Aquinas Thomas Aquinas depicted in stained glass Born Thomas Aquinas 1225 Roccasecca, Kingdom of Sicily …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”