02 May 2022

Securitisation - Orphan Entity - Special Purpose Vehicle


Special Purpose Vehicle and Orphan Status


The SPV issuer of the Note is part of an “orphan structure” when its ownership is structured in such a way that the SPV is not affiliated with the Originator or any of its group anymore. This is to ensure “true sale” treatment and independence


The orphan structure for the SPV is achieved by utilizing the Trust as the ultimate beneficial owner of the SPV. This protect the Investors in case of the Originator’s insolvency enhancing the “bankruptcy remote” status of such securitisation structure.


Securitisation of Underlying Assets that do not meet such criteria may be deemed being re-characterised just as a simple secured loans and therefore vulnerable to attack or avoidance in any subsequent insolvency of the Originator.


To achieve orphan status, the shareholder of the Luxembourg SPV is a Trust controlled by a independent corporate trustee for and on behalf of a charity or a person which is not linked to anyone in the transaction.


The directors of the SPV are often independent from the Originator. Such board of director has very few decision to take as the parameters of the transaction are set out from the origin in the contractual arrangements .


Once the transaction is terminated, the Notes are paid out and the SPV is wound-up and the remaining assets (usually a very little nominal amount) are distributed to the Trust as the sole shareholder. Those assets are then distributed in turn to a designated charity under terms of the deed governing the Trust. Any surplus is generally distributed to charity whether the Trust is established specifically as charitable trust or just a purpose trust.




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