Cheyne Finance Plc, a Dublin-listed investment vehicle managed by British hedge fund Cheyne Capital Management, is seeking to restructure after the value of its investments fell enough to force it to start selling assets.
Cheyne Finance is known as a structured investment vehicle (SIV). SIVs raise a mixture of short-term and medium-term debt to invest in longer-term securities, often in the asset-backed market. Fears have risen over this strategy as fall-out from the US sub-prime mortgage crisis has battered both the values of the securities SIVs invest in and reduced investor appetite for short-term debt.
Credit rating agency Standard & Poor's late on Tuesday downgraded Cheyne Finance's ratings sharply, after the SIV told investors and ratings agencies it had breached its major capital loss limit and had to liquidate assets to repay outstanding debt.
The wind-down of the Cheyne Finance vehicle comes just two weeks after S&P said that ratings on SIVs were weathering market disruption.
'Market conditions remain difficult, with asset prices continuing to be marked lower,' Cheyne Finance said. 'We have been actively selling assets and reducing the size of the portfolio, and have raised sufficient cash to cover projected liabilities for the next few months,' Cheyne said, saying it had enough to cover pay-outs to November 2007.
S&P said that most of Cheyne's portfolio was in property securitisations. Cheyne did not give any details on its portfolio. It said it would start a 'gradual orderly sale' of the investment portfolio and would estimate the total proceeds on Thursday.
