Special Purpose Vehicle (SPV)

A separate legal entity created by an organization for a specific objective

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What is a Special Purpose Vehicle (SPV)?

A Special Purpose Vehicle (SPV) is a separate legal entity created by an organization. The SPV is a distinct company with its own assets and liabilities, as well as its own legal status. Usually, they are created for a specific objective, often to isolate financial risk. As it is a separate legal entity, if the parent company goes bankrupt, the special purpose vehicle can carry on.

A special purpose vehicle can be a “bankruptcy-remote entity” because the operations of the entity are restricted to the purchase and financing of specific assets or projects.

The typical legal forms of special purpose vehicles are partnerships, limited partnerships, or joint ventures. Moreover, in some cases, it is required that the SPV should not be owned by the company on whose behalf the entity is created.

Learn more in CFI’s Financial Analyst Training Program.

Uses of Special Purpose Vehicles

The following are the most common reasons for creating SPVs:

1. Risk sharing

A corporation’s project may entail significant risks. Creating an SPV enables the corporation to legally isolate the risks of the project and then share this risk with other investors.

2. Securitization

Securitization of loans is a common reason to create an SPV. For example, when issuing mortgage-backed securities from a pool of mortgages, a bank can separate the loans from its other obligations by creating an SPV. The SPV allows investors in the mortgage-backed securities to receive payments for these loans before other creditors of the bank.

3. Asset transfer

Certain types of assets can be hard to transfer. Thus, a company may create an SPV to own these assets. When they want to transfer the assets, they can simply sell the SPV as part of a merger and acquisition (M&A) process.

4. Property sale

If the taxes on property sales are higher than the capital gain realized from the sale, a company may create an SPV that will own the properties for sale. It can then sell the SPV instead of the properties and pay tax on the capital gain from the sale instead of having to pay the property sales tax.

Benefits and Risks of Special Purpose Vehicles

Benefits:

• Isolated financial risk
• Direct ownership of a specific asset
• Tax savings, if the vehicle is created in a tax haven such as the Cayman Islands
• Easy to create and set up the vehicle

Risks:

• Lower access to capital at the vehicle level (since it doesn’t have the same credit as the sponsor)
• Mark to Market accounting rules could be triggered if an asset is sold, significantly impacting the sponsor’s balance sheet
• Regulatory changes could cause serious problems for companies using these vehicles
• The optics surrounding SPVs are sometimes negative

Learn more from Wharton about special purpose vehicles and why companies use them.

Additional Resources

Thank you for reading CFI’s guide on Special Purpose Vehicle (SPV). To keep learning and advancing your finance career, we highly recommend the additional CFI resources below:

Special Vehicle Work are a series of missions featured in Grand Theft Auto Online as part of the Import/Export update.

Description

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Special Vehicle Work are Special missions planned by SecuroServ and prepped with specially modified vehicles. Completing a mission will unlock any of the special cars involved in each mission at a discounted rate in Warstock Cache & Carry. In order to unlock a mission, the player has to complete their respective numbers of "Vehicle Cargo" Missions, with at least 32 missions to unlock every mission. Every mission only requires two to four players and is unlocked at Rank 1.

List of Missions

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Getting started

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On the SecuroServ computer at the office, the player only needs to select the "Special Vehicle Work" option, select the desired mission and click on the "Launch Mission" button. A confirmation message will appear on the screen if the player desires to do the mission. If confirmed, a lobby screen appears as in every match. There are options for the missions, including an exit type via helicopter or a land vehicle. Once everything is done, the host can confirm to initiate the Special Vehicle Work mission. Associates will automaticly be invited and if they're in the office, they will automaticly join.

In the mission

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Special Vehicle Work missions should not be very difficult and would not take more than 15 minutes, depending of the player's gameplay style. However, players must have good coordination, as these missions often requires teamwork, mainly for turreted vehicles and coordinated tactics, such as defending another player from enemies. Having the neccesary shooting and driving skills, these missions will be fairly easy to complete.

Rewards

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All the involved vehicles can be unlocked at Warstock Cache & Carry with a SecuroServ trade price by completing their missions. If purchased, these are stored at the Underground Garage and every time the vehicle is destroyed, a new one will be delivered to the aforementioned garage.

Gallery

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option on the SecuroServ computer as of the Import/Export update.

See Also

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• Mobile Operations - Missions added in the Gunrunning update that serve a similar purpose.

Navigation

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