Ad hoc companies – Special purposes vehicles
In financial arrangements, financial engineering makes extensive use of the ad hoc creation of companies , often referred to as ” special purpose vehicles “.
These companies are the backbone of financing without recourse, through project finance or asset finance .
The use of ad hoc companies facilitates significant recourse to leverage by limiting the risks of recourse to debt.
Companies ad hoc are generally located in tax havens and places ” off shore “.
|FINANCING WITHOUT RECOURSEBUSINESS FINANCING
FUNDING OF LOCAL AUTHORITIES
Special purpose companies and securitization
These companies play the role of issuers of securities in securitization transactions.
The shares of these companies, which are shell companies, are often held by charitable trusts. The residual value of these companies is indeed zero, since they issue securities for a value equivalent to the assets transferred to them.
|SECURITIZATION SECURITIZATION MECHANISMS
SPECIAL VEHICLES INVESTMENT
THE PAULSON PLAN
Special purpose companies and balance sheet management
Ad hoc companies are at the heart of the arrangements intended to allow accounting deconsolidation, or non-consolidation. The deconsolidation of technical es have been developed to “write off” the debt of companies leaving the assets that are transferred to and ad hoc companies with the consequential debt.
In particular, heavy investments are subject to deconsolidating arrangements to present a more favorable view of the balance sheet, in particular to financial analysts. The assets of the companies disappear because the associated liabilities are too important: sale of factories or production tools, sale of the fleet of ships of a maritime carrier or of trucks of a road carrier, etc. In addition, the acquisition of these tools can be made from the outset in non-consolidated arrangements, transposing techniques developed into project financing.
Regulation n ° 99-02 of April 29, 1999 of the Accounting Regulation Committee relating to the consolidated accounts of commercial companies and public enterprises defines the ad hoc entity as “… a distinct legal structure, created specifically to manage an operation or a group of similar transactions on behalf of a company. the entity ad hoc is structured or organized in such a way that its activity is actually exercised on behalf of this company, for the provision of assets or provision of goods, services or capital “.
|BALANCE SHEET MANAGEMENT DECONSOLIDATION TECHNIQUES
HOLDING OF SHARES
Funding based on the creation of ad hoc companies was used in particular for the financing of canals (in particular the construction of the Suez Canal), for rail financing, for air transport, for infrastructure (Channel Tunnel ), but also for aeronautical or maritime financing. It is also used for acquisition financing, with the establishment of repossession or acquisition holdings.
In structured finance, various ad hoc companies are set up to set up the organization of payment priorities.