General Growth

Special Purpose Entities (Barely) Survive First Bankruptcy Test

Publications, White Paper


Lenders have used bankruptcy-remote, special purpose entities (SPEs) since the early 1990s to attempt to isolate their collateral from the claims of affiliates of their borrower, especially in loans secured by commercial mortgagebacked securities. The value of the SPE structure was put to the test in the General Growth Properties (GGP) bankruptcy in 2009. In re General Growth Properties, Inc., 409 B.R. 43 (Bankr. S.D.N.Y. 2009). At the end of the day, bankruptcy principles prevailed over most but not all of the separateness and bankruptcy remoteness protections intended to protect the lenders’ collateral.

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Published in Probate & Property, Volume 25, Number 1, January/February 2011. © 2011 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.