Structuring Special Purpose Entities in Real Estate Finance Transactions: Latest Developments

Achieving Separateness, Bankruptcy Remoteness, and True Sales

Recording of a 90-minute premium CLE webinar with Q&A

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Conducted on Thursday, September 10, 2015

Recorded event now available

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Course Materials

This CLE course will prepare real estate counsel to structure special purpose entities (SPEs) for real estate finance transactions to achieve bankruptcy remoteness and avoid substantive consolidation. The panel will discuss lessons from recent bankruptcy cases involving SPE entities.


Lenders require that the owner/borrower of commercial real estate be formed as an SPE as these entities are less likely to become insolvent because of their own activities and can be adequately insulated from the insolvency of related parties. The goal is for the entity to be “bankruptcy remote.”

SPEs are intended to protect the assets of the entity against credit risk of other entities, including the former owner of the assets. Legal separation is achieved by three structuring techniques: true sales, SPEs (or separateness issues), and bankruptcy-remote vehicle.

The bankruptcy-remote SPE must be structured so it is unlikely to file, or have filed against it, a bankruptcy petition, as well as to prevent substantive consolidation with the transferor in the event of the transferor’s bankruptcy. SPE bankruptcy-remote strategies continue to be tested in bankruptcy cases and counsel must apply lessons from recent case law to draft structured financing documentation that minimizes bankruptcy risks.

Listen as our authoritative panel of real estate finance and bankruptcy attorneys discusses best practices for structuring SPEs to achieve bankruptcy remoteness and avoid substantive consolidation. The panel will review recent bankruptcy rulings impacting bankruptcy proofing strategies.



  1. Structural features of SPEs
    1. Restrictions on activities
    2. Restrictions on ability to voluntarily file bankruptcy
    3. Judicial treatment of bankruptcy waivers
  2. Substantive consolidation
  3. True sale vs. pledge
  4. Issues arising from SPE’s bankruptcy filing
    1. Authority to file
    2. Involuntary bankruptcies
    3. Dismissal for bad faith filing
    4. Fiduciary obligations
    5. Springing or “bad boy” guaranties


The panel will review these and other key issues:

  • What factors are relevant in determining whether the transfer of assets to the SPE will be considered a true sale?
  • How should the SPE be structured to maximize bankruptcy remoteness?
  • What will courts consider in deciding whether substantive consolidation of the SPE and the transferor is warranted in a subsequent bankruptcy of the transferor?


Newman, Samuel
Samuel A. Newman

Gibson Dunn & Crutcher

Mr. Newman is a member of the firm’s Business Restructuring and Reorganization Group and the Corporate...  |  Read More

Michelle Raftery
Michelle Raftery

Locke Lord

Ms. Raftery has substantial experience in a wide range of complex structured finance and real estate finance...  |  Read More

Smith, Steven
Steven B. Smith

Dickstein Shapiro

Mr. Smith focuses his practice on complex corporate restructuring and creditors' rights, including in court Chapter...  |  Read More

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