Byzantine ways

It is interesting to observe the flow of information and to survey its sources. The more people I talked to, the more I realized a staggering amount of deals are done solely based on information provided by people who have vested interests in them (mostly bankers). It is very common to see in structured finance where originators offload risks via SPVs while profiting from origination fees. Almost like taking a massive dump in your neighbor's backyard, then charging them a landscaping fee to 'fix' the lawn you just ruined.

While analyzing a corporate structure could be a daunting task, there’s no harm in scrutinizing it with your suspicious and narrow eyes whenever you come across a byzantine corporate structure with extensive off-balance sheet financing. To spot one, start with “SPVs.” One of the most common modi operandi is to sell inventory to a related SPV, which uses the purchased inventory to obtain loans, and so on. While the underlying assets remain the same, this can balloon up the obligations to an incredible multiplier.

This is an interesting world we live in, be smart.