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Hamza Lemssouguer’s fund known for its bold bets suffered margin calls after several investments tumbled

A string of deep losses at Arini Capital Management has the once high-flying hedge fund in a precarious position.

Arini has sold off roughly $800 million in debt holdings in recent weeks, in part due to margin calls from banks it traded with, people familiar with the matter said.

Arini’s roughly $7 billion flagship fund has lost over 20% so far this year as of mid-October and is set to lose more by the end of the month, some of the people said. It has been dragged down by wagers in distressed credits like telecommunications providers Altice International, Optimum Communications OPTU 9.96%increase; up pointing triangle, Virgin Media and Brightspeed, a telecommunications company backed by private-equity firm Apollo Global Management.

Some of those investments have tumbled further in recent weeks: Optimum is nearing a potential chapter 11 and Brightspeed is weighing a bankruptcy filing by year-end, WSJ Pro Bankruptcy reported earlier.

The fund has been selling parts of its more easy-to-trade holdings in recent months. Proceeds from some of the trades went to meet margin requirements tied to investment in credit default swap indexes and other trades, people familiar with the matter said. The indexes track pools of debt issued by European companies that have sold off as interest rates increased and concerns mounted about a French debt crisis.

Arini’s founder Hamza Lemssouguer, a former trader at Credit Suisse known for making concentrated, highly leveraged bets on European credit, launched the firm in 2021 and quickly turned it into one of the fastest-growing hedge funds.

The fund’s exposures to label maker Multi-Color, struggling automotive company Aston Martin and building products maker Cornerstone Building Brands have further strained its portfolio, the people said.

Arini sold off a position in veterinary hospital operator Pathway Vet Alliance in recent days, the people said. The fund sold off investments in debt collection company Intrum and in Ritz-Carlton Yacht collection months ago and has sold some of its holdings of home-care service provider Help at Home, the people said.

The selloff in European corporate debt—and increasing risk in U.S. junk debt—has hit several hedge funds that focus on those markets. The bulk of Arini’s assets are held in funds that haven’t been selling, but the flagship fund’s rocky run has captivated the market given the firm’s fast rise and aggressive trading style.

While the firm’s credit arm is facing pressure, about one third of its assets under management are held in collateralized loan obligation funds, which people familiar with the matter said are still performing well. In October, the firm closed its inaugural direct lending fund, a private credit strategy to deploy about $4 billion in middle-market European investments.

Lemssouguer, a Moroccan-born mathematician who lives in a 400-year-old Tudor estate outside London and raises rare parrots, is renowned in the rough-and-tumble world of distressed-debt trading for placing bigger-than-usual bets that can move markets. He founded Arini after a successful stint at Credit Suisse and has since grown the firm from a $1.3 billion specialist hedge fund into a $22 billion alternative asset manager investing across distressed debt, private credit and structured finance.

The CEO of Arini’s U.S. business, Gavin Yates, left the firm in August and is expected to launch a distressed debt team at Citadel early next year, according to people familiar with the matter.

The move comes as France faces economic and social pressure over its debt and growing borrowing costs

Fitch Ratings lowered its outlook on France’s credit rating to negative from stable, as the country faces economic and social pressure over its debt and growing borrowing costs.

Fitch said the negative outlook reflects a deterioration since its August review, and cited weaker growth, higher borrowing costs and a wider deficit. These factors are worsening debt dynamics from an already weak starting point, Fitch added.

Yields on France’s government bonds have also risen since the last review, Fitch said. The agency said it now forecasts interest payments will increase to 3.3% of GDP in 2028 from 2.5% of GDP in 2025. Fitch also sees France’s deficit at 5.5% of GDP in 2027, which it said reflects a weaker growth assessment and the risk of concessions during the budget process.

The next scheduled review date for France’s rating hasn’t yet been set, Fitch said, but added it expects to review the rating by end-February 2027 at the latest.

France’s public debt is closing in on 120% of its GDP, and the nation’s economy shrank in the third quarter. The government is expecting the deficit to hit 5.4% of GDP this year.

In recent weeks, hundreds of thousands of people have taken to the streets of Paris and other French cities, with some protesters resorting to vandalism and violence.

Right-wing presidential candidate Marine Le Pen has recently cast herself as a unifying figure, and far-left candidate Jean-Luc Mélenchon has vowed to cancel hundreds of billions of euros in French national debt, The Wall Street Journal reported.

Last week, Moody’s Ratings kept its Aa3 credit rating on France unchanged, citing the country’s diversified economy and strong public institutions. However, Moody’s retained its negative outlook on the country as France continues to face political instability and protests.

Moody’s retains a higher rating than peers Fitch and S&P Global Ratings. S&P had lowered France’s rating to A+ in October of last year.

Fitch affirmed the country’s A+ rating, which it said is supported by a large, wealthy and diversified economy, strong institutions, euro area membership and a resilient banking sector.

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Streaming service plans to charge users up to $5 a month to use the feature

Spotify is targeting an early 2027 launch for a new AI-powered service that will let listeners create their own remixes and covers of songs, as it negotiates licensing deals and tries to persuade artists to embrace the technology.

The streaming group is aiming to launch the product in the first quarter of next year, with a potential unveiling around the Grammy Awards in February, according to people familiar with the plans. Spotify is considering charging subscribers an additional $4 to $5 a month for the service, one of those people said.

The product would allow Spotify’s paying subscribers to use AI to create their own versions of popular songs, such as transforming a folk song into a dance track or making one artist appear to cover another’s music.

The timing and pricing have not been finalised and remain subject to change, the people cautioned. Spotify declined to comment. 

Spotify is still negotiating licensing agreements that would allow it to implement the feature with Sony Music and Warner Music. The company has already struck deals with Universal Music Group, the independent label licensing group Merlin and French music company Believe.

The launch is a significant test of whether the music industry can turn generative AI into a new source of revenue, even as the technology has provoked resistance from some artists. 

Spotify and Universal, the world’s largest record company, have been holding meetings with individual artists to persuade them to make their music available for the service, according to people familiar with the discussions.

Winning over major contemporary stars has proved more challenging than securing participation from some established older artists, one person with knowledge of the matter said. Artists will be able to choose whether to participate, even if their record labels have signed licensing agreements with Spotify.

In an interview with the Hollywood Reporter this month, Olivia Rodrigo, who is signed to Universal, was emphatic about her opposition to using AI in her music. “I would never,” she said. “Absolutely no. Hard line on that.”

Spotify announced the product in May but has since declined to provide further details. In August, co-chief executive Gustav Söderström told investors that the company would launch the service when it was ready.

The product is part of Spotify’s broader push to extract more revenue from its subscribers. The company has been developing new products aimed at the most devoted fans, such as concert tickets before they go on sale to wider audiences, and expanded audiobook access.

Spotify has told investors it expects “mid-teens” annual revenue growth through 2030, raising questions about how it will sustain that pace.

Ian Moore, an analyst at Bernstein, estimates that 7 to 8 per cent of Spotify’s US subscribers could sign up for the AI service by the end of 2028. He said new paid add-ons could help Spotify meet its revenue growth ambitions.

The service would differ from AI music generators such as Suno, which allow users to create entirely new songs from text prompts. In comparison, Spotify’s product would let fans manipulate existing songs by artists who have agreed to participate.

Under the proposed plan, royalty money from fan-created remixes would flow back to the original artists. Spotify is also developing a system for remixes to appear in playlists, with plays counting towards the original songs in Spotify’s music charts, said people familiar with the plans.

At a September investor conference, Söderström argued older artists should join the AI service to make more money. 

“If you’re an artist today from the ‘80s or ‘90s, the way that you would make more money today is to hope that some other artists would create a remix or cover of your song. Now, you can hope that your fans actually create remixes and covers of your songs.” 

“If one of your fans creates the remix of your song, that actually increases the share of the streaming [revenue] pool that you get,” he said.