S&P cuts British firm's debt rating

Cheyne Capital Management, a London-based independent hedge fund manager, may be forced to liquidate some assets to repay its creditors, published reports said. That’s because Standard & Poor’s, the New York-based rating agency, cut Cheyne Finance’s ratings by six notches, a turnaround from its Aug. 15 rating that declared the company’s notes of highest investment grade. S.&P lowered Cheyne’s issuer rating from triple-A to A-, its commercial paper rating from A-1+ to A-2, its senior notes from triple-A to A-, and its mezzanine notes from A to B-, according to published reports. Cheyne Finance is the most recent structured investment vehicle, or S.I.V., debilitated as the $2.2 trillion commercial paper market, formerly considered a low-risk investment, has been hit by recent turbulence in subprime-mortgage investments. S&P last week cut ratings on four S.I.V.s arranged by Barclays Capital, a London-based investment bank, and now two of those vehicles are in the process of selling assets, and two are on the verge of collapse after trouble rolling over commercial paper, published reports said. S&P said that because Cheyne Finance failed to meet tests measuring the value of its investment portfolio against debt obligation, the company must liquidate assets, possibly as soon as Thursday.