An $8.8 billion (£4.35 billion) investment fund managed by the London-based Cheyne Capital Management was put into receivership yesterday as the short-term credit famine looked set to intensify.

Control of Cheyne Finance (CF), a special investment vehicle (SIV) financed by short-term borrowings and invested in sub-prime mortgages and other assets, was handed over to Deloitte.

Neville Kahn, one of the receivers, said: “We are trying to bring some stability to the situation while we see what the refinancing options are.”

He denied a report from Moody’s, the rating agency, which said that the fund was in “irreversible wind-down mode”. Mr Kahn said that one option was to find an investor prepared to pump in fresh liquidity.

It was too early to say whether investors in CF’s $350 million of junior debt and mezzanine finance, who would be last in the queue in the event of a wind-up, were likely to suffer losses.

CF has $2 billion of cash and liquid securities that can be used to pay back commercial paper as it comes due. It will continue to be managed by Cheyne Capital, which may waive its fees.

Like other SIVs, CF has been hit by the drying up of demand for commercial paper, of which they need a perpetual supply. Analysts gave warning yesterday that next week would be critical, with about $113 billion of euro commercial paper due to roll over.

Moody’s yesterday downgraded or warned of future downgrades on $14 billion of debt owed by SIVs, including that of Axon Financial Funding, a SIV sponsored by the hedge fund manager TPG-Axon Capital.

Debt owed by Harrier Finance Funding and Kestrel Funding, SIVs created and managed by the German savings bank WestLB, were downgraded or placed on review for possible downgrade. Victoria Finance Ltd and Victoria Finance LLC, SIVs owned and operated by Ceres Capital, a US fund manager, were also placed on review.

Moody’s described the unheaval in the SIV market as “unprecedented”, adding: “We have seen a sudden market deterioration in the value of portfolios. There is a complete inability to issue debt, and asset pricing is under pressure.”

Cheyne Capital was founded in 1999 by Stuart Fiertz and Jonathan Lourie, former bankers from Morgan Stanley, which helped to design CF. Another of their funds, Queen’s Walk Investments, has also been hit by the sub-prime implosion.

CF was put into receivership by the trustee Bank of New York Mellon Corp after a decline in the value of its assets triggered a so-called enforcement event.

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