Standard Chartered has walked away from the rescue of its $7.1 billion (£3.65 billion) structured investment vehicle (SIV), after the value of its assets continued to plummet.

Investors who bought the senior debt notes issued by the SIV, called Whistlejacket, will begin to offload their investments if they do not receive a multimillion-pound payment today from the SIV’s receivers. Capital noteholders, who contributed start-up capital when the SIV was founded, appear certain to lose their investments.

Whistlejacket was put into receivership last week. Neville Kahn, the Deloitte partner handling the receivership, said yesterday that he was in talks with other banks that might like to buy the SIV’s underlying assets. He declined to name the banks he was in conversations with.

He also ruled out a firesale of Whistlejacket’s assets, which include asset-backed securities, bonds and collateralised debt obligations (CDOs). Mr Kahn said there was “absolutely, categorically, no need” for a quick sale of the investments.

One solution, he said, could be to hold on to Whistlejacket’s assets to maturity. “We’re trying to work through this as quickly as we can but there is no timescale,” he said.

SIVs are off-balance-sheet vehicles that issue short and medium-term debt. The cash raised is used to buy longer-term assets, such as CDOs holding complex credit products. SIVs ran into trouble during the credit crunch last year, when the value of their underlying assets plunged and investors who bought their short-term debt fled the market. SIVs have capital investors who put in cash that is leveraged with the money raised as short-term debt. Last week the value of Whistlejacket’s assets fell to less than half of the amount of its start-up capital. The fall below 50 per cent was a preset trigger for calling in the receivers.

Standard Chartered had offered to buy the assets and transfer them to its balance sheet. But the market for the assets has continued to fall and the bank is not permitted by the Financial Services Authority to pay more than market value for the assets.

At the same time, the receiver is thought to have decided not to meet the SIV’s payments to senior noteholders until he has valued the vehicle.

On Friday, the SIV missed a large payment to noteholders. If this payment is not made by today, the SIV will be considered by ratings agencies to be in default and its debt will be down-graded. Many noteholders are not permitted by their own rules to hold default-grade assets, so will be forced to sell their investments.

Standard cited the “impracticality of completing any proposal within the confines of the receivership” for its decision to walk away from the vehicle.

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