What is bankruptcy remoteness?
Bankruptcy remoteness means the assets in a Comparto are isolated from the fate of the originator and of every other Comparto. Investors have recourse to the assets allocated to their Comparto, and only to those. This legal isolation is what makes the structure financeable for a professional investor.
Bankruptcy remoteness — distance from default risk — means the assets held in a Comparto are legally isolated from the financial situation of whoever contributed them.
In practice: if the originator runs into difficulty, its creditors have no recourse against the assets allocated to the Comparto. Symmetrically, investors in a Comparto have recourse only to the assets of that Comparto.
This isolation also holds between Compartos on the same platform. A difficulty in one Comparto affects neither the assets, nor the cash, nor the repayment of another.
It is a central criterion in the review carried out by a custodian bank or an institutional investor before any subscription: they want to know exactly which pool of assets their claim covers.