Cayman SPV Asset Finance Management
Bell Rock SPV Asset Finance Management will provide significant expertise in the structuring, administration and oversight of special purpose vehicles (SPVs) used in off-balance sheet capital market or leveraged financed transactions. We are often engaged early on in the process to review the transaction structure, review legal agreements and often engaged to provide structuring with introductions to counsel, trustees, security and paying agents. We understand the legal and regulatory requirements for private placement bond issues and bank financed or hybrid financing arrangements within such transactions.
We are an independent firm and given the increased focus by regulators and investors on financial firms with regard to the avoidance of conflicts within structured finance, we provide an independent role separate from legal counsel, trustees, collateral managers, arrangers, originators and all other parties within the transaction.
We work closely with legal counsel, investment banks, export credit agencies, trustees, security agents, arrangers and collateral managers.
Types of Transactions we provide SPV Management services to include:
- Structured Finance including CDO’s, CLO’s and repackagings
- Aircraft & Aviation Finance
- Real Estate Finance
- Islamic Finance
- Project Finance
- Shipping Finance
- Blocker Entities in Fund Structures for PE funds, Real Estate Funds or Hedge funds
- Holding Assets such as real estate, shares in a larger corporate group structure, IP rights.
Our SPVs services include:
We typically provide two highly experienced and professional directors to the board of a SPV, who are resident in the Cayman Islands. Our team understands even the most complex transaction structures, capital market transactions and loan financing arrangements. Having previously worked for major financial institutions onshore we also appreciate the time sensitive nature for closing transactions.
SPV Corporate Administration
We provide full company administration to the SPV whether the transaction is 3 years or 15 years to maturity.
Registered Office Services
- Provision of Registered Office.
- Provision of Company Secretary or Assistant Secretary.
- Preparation of minutes of shareholders’ and directors’ meetings.
- Maintenance of company records and statutory registers.
- Preparing and filing of all necessary returns and reports to the Registrar of Companies.
- Arranging Legalisation and Apostille of documents.
- Certification of corporate documents and issuing certificates of incumbency.
- Obtaining certificates from the Registrar of Companies.
- Preparation of Powers of Attorney.
- Voluntary Liquidations
Advantages of using the Cayman Islands
Cayman Islands’ laws are essentially based on English common law, so the main issues of corporate power, directors’ fiduciary duties, corporate personality, limited liability and corporate benefit are substantially the same as the position under English common law.
Cayman Islands commercial legislation benefits from being much less cumbersome in many of the areas that have caused considerable difficulty and uncertainty under the corresponding English statutes, for example:
- The Companies Law (as amended) of the Cayman Islands (the “Companies Law”) provides that shares are redeemable not only out of profit but also, subject to limited solvency tests, from the credit balance on the share premium account enabling an equity instrument to have much of the economic substance of debt;
- Under English Law it is unlawful for a company to directly or indirectly provide finance for the acquisition by a third party of its own shares, but financial assistance in the Cayman Islands is not of itself unlawful. However, the directors must simply ensure that the transaction is demonstrably for the material benefit of the company;
- No requirement under the Companies Law to file audited accounts (unless they are required to do so e.g. mutual funds or licensed entities, trust companies, banks etc).
Ratings agencies typically apply a criteria for bankruptcy remoteness which ensures protection against voluntary and involuntary insolvency risks such as the following:
- The SPV is restricted to activities which ensure a sufficient cash flow to pay the securities;
- Non-petition language must be included in agreements between the SPV and its creditors together with limited recourse language;
- A typical off-balance sheet structure will have the share trustee agree with the note trustee that it will not do anything to cause the SPV to breach its contractual covenants;
- The SPV should be an independent entity in order to avoid consolidation of the assets or balance sheet of the other transaction parties. Given focus on independence within financing structures we recommend the appointment of an independent share trustee to hold the shares either under a charitable trust or a purpose trust;
- The SPV will enter into enforceable security arrangements over the assets in favor of the note trustee or security trustee, as the case may be.
It is key in structured finance transactions that there is no “tax leakage.” The size of most transactions means that a small number of bps can amount to a large tax charge. In the Cayman Islands there are no corporation taxes on any company carrying on offshore business. The use of Cayman Islands company managers with local directors means that SPV’s are centrally managed and controlled in the Cayman Islands.
There is no tax withheld by the Cayman Islands Government on any payment of principal or interest.
- In structured or asset finance transactions there are generally no relevant restrictions on the business an SPV can do from the Cayman Islands: it can lend, borrow or issue debt securities without the requirement to become licensed;
- Setting up an SPV is flexible and quick. It can be set up in as little as 24 hours;
- The Cayman Islands remain inexpensive to set up a SPV’s. Fees payable to the Cayman Islands Government upon incorporation and annually thereafter are based on the SPV’s authorised share capital, and currently range from USD854 to USD3,131. The majority of SPV transactions will have authorised share capital of no more than USD50,000 and therefore fees will be at the low end of the range;
- There is no specific regulation of debt issues (unless listed on the Cayman Islands Stock Exchange);
- There are no foreign exchange controls;
- Securities issued are often rated by the leading international rating agencies to increase their marketability. The status of the Cayman Islands as a British Overseas Territory means that the sovereign ceiling for the Cayman Islands is high, which is a distinct benefit.The Cayman Islands Stock Exchange (“CSX”) has been recognised as an “approved organisation” by the London Stock Exchange since 1999. Eurobonds listed on the CSX now benefit from the quoted Eurobond exemption for withholding tax purposes. This means that the CSX competes with stock exchanges such as Luxembourg and London.