Special Purpose Vehicle (SPV)

A legally distinct entity, typically a limited liability company or similar structure, formed for the sole purpose of holding a defined pool of legal-asset interests and issuing interests or notes against that pool to investors, isolating the assets from the operational and credit risk of the fund manager or originator that assembled them. The SPV holds the litigation claims or funding receivables as its only assets, has no employees or independent business operations, and is structured with restrictions on its activities — no additional debt, no merger, no asset disposition outside the ordinary course — specifically to preserve the predictability investors require when their return depends solely on the performance of the assets inside the vehicle. Because the SPV is bankruptcy-remote from its sponsor, investors in the SPV's notes or interests are protected from the sponsor's own creditors even if the sponsor itself becomes insolvent, provided the SPV was properly structured and the asset transfer into it satisfies the legal requirements for a true sale.

The SPV is what allows investors to underwrite a defined pool of legal assets on its own merits, without taking on the sponsor's broader balance sheet and operational risk — a critical distinction for institutional buyers who are willing to accept litigation-outcome risk but not sponsor-credit risk in the same instrument. Structurers spend considerable diligence effort ensuring the SPV's governing documents and asset transfer satisfy bankruptcy-remoteness requirements, since a defectively structured SPV that a court later treats as part of the sponsor's estate defeats the entire purpose of the structure.