Special Purpose Vehicle/Entity - SPV/SPE

Filed Under » , , , , , ,
Dictionary Says

Definition of '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."
Investopedia Says

Investopedia explains 'Special Purpose Vehicle/Entity - SPV/SPE'

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.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Bankruptcy

    A legal ...

  2. Credit

    1. A contractual ...

  3. Off-Balance-Sheet Financing

    A form of ...

  4. Project Finance

    Defined by the ...

  5. Securitization

    The process ...

  6. Subsidiary

    A company whose ...

  7. Derivative Product Company - DPC

    A ...

  8. Securitize

    A pooled group ...

  9. Commercial Paper Funding Facility - CPFF

    An institution ...

  10. Variable Interest Entity - VIE

    An entity ...

Articles Of Interest

  1. Investing In Securitized Products

    Securitized assets are customizable and have a wide range of yields, making them an attractive asset class.

  2. Off-Balance-Sheet Entities: An Introduction

    The theory and practice of these entities varies greatly. Investors need to learn what they're getting into.

  3. Putting Management Under The Microscope

    We tell you where to find the telltale signs of corporate misdeeds.

  4. Common Clues Of Financial Statement Manipulation

    Search for the "bloody" fingerprints in accounting crimes.

  5. Investing In Emerging Market Debt

    This asset class has left much of its unstable past behind. Find out how to invest in it.

  6. The Impact Of Combining The U.S. GAAP And IFRS

    The convergence of accounting standards is changing the attitudes of CPAs and CFOs toward harmonization of international accounting.

  7. Analyze Cash Flow The Easy Way

    Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors.

  8. Digging Into Book Value

    This calculation will serve up your portion of the shareholder pie.

  9. CPA, CFA Or CFP® - Pick Your Abbreviation Carefully

    A couple of letters can mean a big difference. Find out which designation you need and how to get it.

  10. Using Enterprise Value To Compare Companies

    Learn how enterprise value can help investors compare companies with different capital structures.
Sponsored links

comments powered by Disqus
Hot Definitions

  1. Love Money

  2. Shark Watcher

  3. Judo Business Strategy

  4. Dogs Of The Dow

  5. Chinese Hedge

  6. X-Mark Signature

Recommended
Loading, please wait...
See More »
Trading Center