Special purpose entity (SPE)
Asset-Backed Securities glossary · Asset Backed Securities
Definition
An entity created to isolate a specific set of assets and liabilities from other business risks.
Special purpose entity (SPE) in plain English
A Special Purpose Entity is a separate mini-company created for one narrow job: to hold a specific bundle of assets (like a batch of loans) walled off from everything else. The point is protection — if the parent company that created it goes bankrupt, the assets inside the SPE are legally fenced off and can't be dragged down with it, so the investors relying on those assets stay safe. Picture putting your rent money in a separate lockbox that your roommate's creditors legally can't touch even if your roommate goes broke.
Also called: SPE
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