Hedge Fund Arini Offloads $800 Million in Debt as Losses Deepen
Hamza Lemssouguer’s fund known for its bold bets suffered margin calls after several investments tumbled
- Arini Capital Management has sold about $800 million in debt holdings in recent weeks, partly due to margin calls from banks.
- The firm’s flagship fund lost over 20% this year as of mid-October, dragged down by wagers in distressed credits like Altice International.
- Proceeds from some trades went to meet margin requirements tied to credit default swap indexes and other trades.
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.