S&P cuts commercial paper of two SIV-lites
NEW YORK, Aug 24 (Reuters) - Standard & Poor's on Friday cut its ratings on the commercial paper issued by two "SIV-lites," or leveraged investment vehicles, run by Solent Capital Partners LLP and Avendis Financial Services.
The two vehicles, Mainsail II and Golden Key, invest in higher-yielding securities with cash raised by issuing short-term commercial paper and other notes.
Unlike other issuers of asset-backed commercial paper, SIV-lites use borrowed cash from third parties and have looser restrictions on investments. The structured investment vehicles have come under intense pressure in recent weeks as investors spooked by contagion from risky U.S. mortgages have avoided buying their debt.
S&P cut the notes issued by Mainsail II, run by UK hedge fund Solent Capital, one notch to "B," the fifth-highest rating.
The rating agency cut notes issued by Golden Key to "C," the second-lowest rating, from "B."
"The rating action follows a breach of the mandatory acceleration test. This is an enforcement event, so the vehicle is now in a 'frozen' state," S&P said in a statement on Golden Key.
"Golden Key has to liquidate its current asset portfolio, but the exact timeframe for this is yet to be confirmed," S&P said. Mainsail II has up to 30 days to liquidate its portfolio.
