The very same factors that
enhanced the development of the
banking, insurance, and mutual
fund industries in the Cayman
Islands proved of similar
benefit to the development of
the capital markets and
structured finance transactions.
Specifically, the political and
economic stability, the absence
of taxation, withholding tax and
exchange control and the
presence of highly sophisticated
service providers provided a
hospitable financial environment
for the development of the debt
issuing special purpose vehicle.
The typical structured financed
transaction involves a debt
issue made by a Cayman Islands
corporation, trust, or
partnership known as a special
purpose vehicle which will then
acquire the underlying assets
from the promoting financial
institution (the "Originator").
The underlying assets may be
fixed or revolving but will
usually convert into cash within
a finite period of time, thereby
redeeming the debt issued by the
special purpose vehicle. Such
financing arrangements
undertaken by special purpose
vehicles encompass everything
from the simple capital markets
euro paper issue, re-packaging,
aircraft and ship financing to
the somewhat more complex
securitized transactions which
involve the acquisition by the
special purpose vehicle of real
property mortgages, credit card
or other receivables, finance
leases or indeed interests in
mutual funds. In short, any
financial or other asset which
provides an income stream may be
acquired by the special purpose
vehicle. The essential feature
of the structured finance
transaction is the acquisition
by the special purpose vehicle
of these underlying assets from
the Originator and thereby, the
financial characteristics of
those underlying assets may be
converted into readily
transferable marketable debt
instruments issued by the
special purpose vehicle which
may comprise notes or bonds and
which may be rated and listed.
