Introduction
This memorandum examines the use of Cayman Islands off-balance
sheet financing structures. There are several types of transactions
that would call for an off-balance sheet structure, the two most
common of which would be structured finance transactions and asset
finance transactions. The off-balance sheet structure is designed
to isolate the underlying assets from the control, and hence the
bankruptcy risk, of third parties (eg the originator in a
securitisation transaction or the airline in an aircraft finance
transaction).
Structured Finance Transactions
The essential element of a structured finance transaction is the
conversion of certain assets into marketable securities. Typically
a Cayman Islands' special purpose vehicle
("SPV") will be set up to purchase an
asset (or pool of assets). The SPV funds the purchase of such asset
by the issue of notes or preference shares
("Securities"). The asset (or pool of
assets) acquired by the SPV will
