Other
Arini Capital and Monarch Alternative Capital Inject €30m Senior Loan Into Kem One
•February 19, 2026
0
Why It Matters
Senior secured loans give certain hedge funds priority recovery, while short positions allow others to profit from sector-wide distress, reshaping credit risk dynamics in European chemicals.
Key Takeaways
- •Kem One bonds fell to ~2 cents per euro
- •Arini and Monarch provided €230m senior loan
- •Senior loans rank ahead of collapsed bonds in restructuring
- •Sona, Polus shorted debt, profiting from price collapse
- •Europe chemicals sector faces overcapacity, high energy costs
Pulse Analysis
The Kem One saga underscores how distressed‑debt investors can reshape a company’s capital structure when traditional bond markets seize up. After energy price spikes and an influx of low‑cost Chinese chemicals eroded margins, Kem One’s senior unsecured bonds tumbled from about 70 cents to a mere 2 cents on the euro. In response, a consortium led by London‑based Arini Capital and New York’s Monarch Alternative Capital extended a €200 million senior loan last year and added a €30 million tranche this spring. Because senior secured debt ranks ahead of the collapsed bonds, these funds stand to recover a larger share of any eventual restructuring or liquidation proceeds.
At the same time, a parallel trade emerged as hedge funds such as Sona Asset Management and Polus Capital Management built sizable short positions against Kem One’s debt. By betting on further price declines, these funds have already logged substantial gains as the bond market imploded. This dual‑track approach—providing fresh senior financing while shorting junior claims—illustrates how credit hedge funds can simultaneously hedge exposure and capture upside in distressed environments. The strategy also signals to other indebted European manufacturers that senior lenders may still find opportunities, even as bond investors walk away.
Kem One’s distress is a microcosm of broader challenges facing Europe’s chemicals industry. High production costs, carbon‑border adjustments, and persistent overcapacity—exacerbated by cheap imports from China—are compressing margins across the sector. Credit investors have already retreated from peers like Ineos, indicating a tightening of financing conditions. As the industry grapples with these headwinds, the balance of power may shift toward senior lenders and opportunistic short sellers, reshaping the risk‑return landscape for future chemical‑sector debt issuances.
Deal Summary
London‑based Arini Capital and New York‑based Monarch Alternative Capital have provided French chemicals producer Kem One with a fresh €30 million senior loan, adding to a €200 million loan extended last year. The senior secured financing positions the funds ahead of Kem One’s distressed bonds in any restructuring.
Article
Source: Hedgeweek
The distressed debt of French chemicals producer Kem One has become a battleground for global credit hedge funds including Arini Capital and Sona Asset Management, amid fears over the long-term viability of Europe’s chemicals sector, according to a report by the Financial Times.
Kem One, which is owned by US private capital group Apollo Global Management, has seen its bonds fall to near total losses amid rising energy costs and an influx of cheap chemical supply from China. The collapse has split investors into opposing camps, with some funds betting on a restructuring recovery while others have profited by shorting the company’s debt.
A group of distressed credit investors led by London-based Arini and New York’s Monarch Alternative Capital has continued to provide Kem One with fresh financing. The two funds extended a €200m senior loan last year and followed up with an additional €30m injection recently, a facility that ranks ahead of Kem One’s publicly traded bonds.
Those bonds, totalling €450m, have collapsed from around 70 cents on the euro early last year to roughly 2 cents, with markets now pricing in near-total losses for junior creditors. By contrast, the Arini and Monarch loans are senior secured, positioning those funds to recover value ahead of bondholders in the event of a restructuring or default.
On the other side of the trade, hedge funds including Sona and Polus Capital Management have built short positions in Kem One’s debt, generating gains as prices have cratered.
New York-based Diameter Capital Partners, in which Apollo holds a stake, has also established a smaller short position as part of a broader bearish view on the global chemicals sector. In a recent investor letter, Diameter said excess supply from China, rather than demand weakness, was driving stress across chemicals markets and warned that 2026 could mark a turning point for the industry.
Kem One’s plight reflects a wider malaise in Europe’s chemicals sector, which has been squeezed by high production costs, carbon tariffs and global overcapacity. Credit investors have also pulled back from peers such as Ineos, whose sizeable debt load has come under pressure in recent months.
0
Comments
Want to join the conversation?
Loading comments...