What does off-balance-sheet mean?
What it means to house an exposure in a Comparto rather than on the originator's own accounts.
Off-balance-sheet describes the fact that an economic exposure — an asset, an income stream, a risk — does not appear in the accounts of the person or company that contributed it, because it has been housed in a legally distinct structure.
In the case of a Comparto, the asset or strategy contributed by the originator is transferred or allocated to the cell. Investors subscribe to a security issued by that cell — they hold a claim on the assets of the Comparto, not on the originator itself.
The direct consequence is that the exposure does not sit on the originator's balance sheet: not as an additional asset, since it has been transferred to the cell, and not as a liability towards investors, since the debt is carried by the Comparto rather than by the originator.
This contrasts with conventional financing — a bank loan, a direct bond issue — where the exposure and the corresponding debt remain on the borrower's balance sheet, with the consequences that follow for its financial ratios and existing covenants.
Final accounting treatment nonetheless remains specific to each situation: off-balance-sheet qualification depends on the applicable accounting standards (IFRS, US GAAP, local GAAP) and on the judgement of the originator's auditor. Comparto structures the transaction so that it is off-balance-sheet by legal construction; definitive accounting confirmation always rests with the originator's auditor.