by Calculated Risk on 10/17/2007 09:41:00 PM

From Bloomberg: Cheyne Finance SIV Won't Pay Debt as It Falls Due

Cheyne Finance Plc, the structured investment vehicle managed by hedge fund Cheyne Capital Management Ltd., will stop paying its debts, a receiver from Deloitte & Touche LLP said.

... Cheyne Finance's debt with different maturities will now be pooled together, rather than shorter term debt being repaid sooner, Neville Kahn, a receiver from Deloitte said today in a telephone interview.

``It doesn't mean we have to go out and fire-sell any assets, quite the opposite in fact,'' Kahn said. ``The paper that falls due today or tomorrow won't be paid as it falls due.''

Cheyne Finance appointed receivers in September to oversee the management of its assets after the SIV was forced to liquidate assets to repay maturing commercial paper.
...
Cheyne issued $8 billion of short-term debt to buy securities linked to home loans, according Moody's Investors Service.

The receivers declared an ``insolvency event,'' Deloitte said. That means the SIV is unable to pay its debts when they are due, according to its prospectus.

Borrow short, lend long, go broke; one of the oldest stories in lending, but somehow rediscovered by every generation. The new wrinkle here was to make some especially bad loans too.