Moody's has downgraded the ratings of the Euro MTN and US MTN programmes of Cheyne Finance to Ca from B2. The move follows a ratings downgrade in November of last year on the Euro and US MTN programmes. Moody's originally said the rating action last year reflected that the company would hold its assets to maturity. But today's rating action shows that the Trustee has approved certain actions to liquidate and restructure the remaining asset portfolio. The losses, which Moody's calls a fire sale, are consistent with a rating of Ca.

Moody's understands that medium term noteholders will have the option of accepting a cash payment representing their pro-rata share of the sale proceeds of an exchange for the equivalent face amount of notes issued by the newly formed special purpose company. The new notes would have maturity dates longer than those of the transferred portfolio and would be insulated from market value risk, although still exposed to the risk of default.