Tax can be essential to the basic viability of a structured finance transaction as the following paragraphs will explain.
What are structured finance transactions?
Structured finance transactions come in many forms. A securitisation transaction is a classic example. Here the originator of loans or other receivables sells them to an orphan SPV for an agreed sale price in order to raise finance (see figure 1). The SPV funds the sale price by issuing notes to its lenders. It subsequently uses amounts payable to it under the receivables to fund interest and principal under those notes.
However other forms of structured finance transaction may also be entered into; for example a collateralised loan obligation or ‘CLO’ transaction under which an SPV...
