Bankruptcy-remote transactions and bankruptcy law--a comparative approach (part 1): changing the focus on vehicle shielding

Abstract

Bankruptcy-remote transactions and their accompanying Special Purpose Vehicles (SPVs, also called Special Purpose Entities, or SPEs) have enjoyed widespread use in the past, and grown in complexity and sophistication. On another level, the debate on bankruptcy policy has allowed bankruptcy law to be seen in light of the need to maximize value and society’s other goals. However, both types of analysis have so far been disconnected: practical studies of securitization and other bankruptcy-remote transactions (which are normally favourable to it without qualifications) do not normally take into consideration the broader implications of the use of SPVs/SPEs in policy terms. For policy analysis, on the other hand, bankruptcy-remote transactions are more of an isolated example or anecdote, and, if they are given more relevance as a test case, they tend to be painted in broad brushstrokes, as either a welcome or dangerous innovation, without paying much attention to the details of each type of transaction.