A special purpose vehicle (SPV) is a subsidiary company with an asset/liability structure and legal status that makes its obligations secure even if the parent company goes bankrupt. An SPV may also be a subsidiary corporation designed to serve as a counterparty for swaps and other credit sensitive derivative instruments.
SPVs may be formed through limited partnerships, trusts, corporations, limited liability corporations or other entities. An SPV may be designed for independent ownership, management and funding of a company; as protection of a project from operational or insolvency issues; or for creating a synthetic lease that is expensed on the company’s income statement rather than recorded as a liability on the balance sheet. They help companies securitize assets, create joint ventures, isolate corporate assets or perform other financial transactions.