InvestorQ : Can securitization be done without an SPV (Special Purpose Vehicle)? and does it involve SPV?
Mahil Khan made post

Can securitization be done without an SPV (Special Purpose Vehicle)? and does it involve SPV?

Answer
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Jignesh Gupta answered.
1 month ago


A Special Purpose Vehicle (SPV) acts as a subsidiary company to enable an asset and liability structure as well as hold up a legal status and secure obligations, on the off chance that a company goes bankrupt. Hence, it can also be referred to as a bankruptcy-remote entity. SPVs are normally created for a temporary purpose or activity, through a variety of entities, the likes of which include trusts, limited partnerships, corporations, and limited liability corporations.

The debt of another company can be transferred to an SPV that is either a limited or partnership company. A company can primarily isolate any risk that its debt or operations may pose, by transferring the debt off its balance sheet into that of the SPV account.

The SPVs issues debt instruments which are called Pass-Through Certificates (PTCs). By making these debt instruments available in the markets, the organization manages to transform illiquid assets to liquid assets which can be used to fund other businesses. I don’t think securitization is possible without an SPV.