Using special purpose vehicles in aviation finance—subsidiary companies, orphan trusts and limited partnerships


Produced in partnership with Norton Rose Fulbright
Practice notes

Using special purpose vehicles in aviation finance—subsidiary companies, orphan trusts and limited partnerships


Produced in partnership with Norton Rose Fulbright

Practice notes
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The use of special purpose vehicle structures is very common in aviation finance. They provide various advantages for lenders such as tax benefits and providing a bankruptcy remote vehicle for the financing.

Types of special purpose vehicle and orphan trust

A special purpose vehicle (SPV) (also known as a single purpose company (SPC)) is a legal entity set up for a limited purpose; in the case of aviation finance this is usually to own an aircraft for a specific transaction. There are many types of SPVs used in aviation finance, the main ones being:

  1. •

    subsidiary companies

  2. •

    orphan trusts, and

  3. •

    limited partnerships

Each of these types is considered below. The type of special purpose vehicle which is used will vary on a transaction by transaction basis.

Subsidiary companies

Subsidiary companies are usually limited liability companies incorporated in a tax-friendly jurisdiction. Depending on the structure, they can be:

  1. •

    owned by one of the banks financing the transaction (and in a syndicated facility, this is usually the Agent)

  2. •

    owned

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Jurisdiction(s):
United Kingdom
Key definition:
Special purpose vehicle definition
What does Special purpose vehicle mean?

A legal structure sometimes also used in contingent asset funding strategies under which both the sponsor and the fund achieve a specific objective, eg the employer places assets into an SPV which are loaned back to the employer on specified terms, the returns being shared between the fund and the sponsor.

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