Keeping debt off your balance sheet - reversing one's approach to consolidation of SPE's

Much work has been done over the past few years with accounting standards to try and capture SPE's and get them consolidated into group financial reports, thus exposing the debt.

However, a slightly different take on the matter is the following:
Set up a 100% held subsidiary with say ZAR100,000 of share capital. After incorporation, issue ZAR900,000 worth of high rate non-voting, non-cumulative redeemable preference shares, with regularly scheduled dividends, e.g. quarterly. Only the redemption amount at the end will be treated as debt for IFRS purposes, and the balance of the non-cumulative pref dividend rights will be treated as equity.

Get this SPE to issue your OpCo ZAR1,000,000 worth of secured debt.

It is expected that this SPE will be consolidated into your group financials and what will show up is a minor debt portion (PV of redemption amount of pref shares) and equity on the credit side of the balance sheet.

However, miss one dividend payment and the entity will deconsolidate, with the pref share holders taking control as their voting rights due to non-receipt of the pref dividend kick in. At this point, they have control over a secured debt instrument to your OpCo, with the associated security that this provides, at the cost of a single missed dividend payment.