Can someone please clarify how an SPV is able to get any credit rating “it wants”? Also, can someone please clarify how credit enhancement works (which I think is what the SPV uses to get a better credit rating)? Thanks!作者: brainsX 时间: 2013-8-16 11:07
Special Purpose Vehicle/ Entity (SPV or SPE) is a subsidiary separate from the parent company with its own asset/ liability structure. It is mainly used to finance a specific project or asset, and since it’s a seperate entity, its obligations are secured even if the parent company goes bankrupt - thus a credit enhancement from the bank’s perspective.
In the past it was used to hide debts (there is an optional reading on Enron in level 1 text i think) for the parent company to move liabilities off the book. But now i think the accounting standards require the parent company to show consolidated financial statements (Accountants here correct me if i’m wrong).
NANA作者: giorgio10 时间: 2013-8-16 11:07
Hi, thanks for the reply, but it wasn’t really the answer I was looking for… I know what an SPV is but I don’t understand how it can be used for credit enhancement - the book mentions that an SPV can literally get any credit rating it wants - I don’t really understand how that works.
Thanks作者: comp_sci_kid 时间: 2013-8-16 11:07
OK, I guess this will be dealt with in more detail at level 2 (although I do understand it a bit better now with regards to capital structure) so I will concentrate more on other material just now. Thanks for your help!
