Gulf Capital, the UAE-based investment firm, has reached a final close on its second credit fund after raising $250 million as it continues its mission to be a “one-stop shop” provider of financing across the Middle East.
Gulf Credit Opportunities Fund II provides mezzanine loans alongside convertible debt to companies with revenues of $20 million-$250 million based in Turkey and Africa, as well as the Middle East.
However, the firm is open to investing in all parts of the capital structure. In addition to operating a private debt platform, it also invests in private equity and real estate opportunities.
“We want Gulf Capital to be a total capital solution provider across the capital structure, a one-stop shop for the fast growing companies across the Middle East,” Karim El Solh, chief executive of Gulf Capital, told PDI.
Targeting 15-18 percent internal rate of return, El Solh said it is finding the majority of its opportunities in high growth companies denied financing by banks.
“Contrary to Europe, the bulk of our private debt investments is not to finance acquisitions but for growth capital for companies with strong management teams and promising business plans that need to reach the next level. Often, these companies are often asset-light, mostly focused on services and are unable to secure traditional bank financing,” he told PDI.
Investors to the fund include sovereign wealth and pension funds and insurance companies based in the Middle East. In June, the International Financing Corporation, the investment arm of the World Bank, contributed $25 million, an increase on its allocation to the previous vehicle.
Gulf Credit Opportunities Fund I closed on $221 million and is now fully invested. The firm completed its first investment from the fund in September, providing a loan to oil and gas investment firm Carbon Holdings. While the fund targets ticket sizes between $10 million and $30 million, it is open to partnering with existing LPs on larger deals.
For the latest strategy, Africa is becoming an increasingly attractive region to provide credit. The firm works with Serengeti Capital, an investment firm headquartered in Accra, Ghana, to source opportunities in the region. A recent report from the World Bank claims there is a $368 billion credit gap across the continent.
“It’s possible that up to 30 percent of our second private debt fund will be invested in the African region. With the current soft economic environment and limited bank liquidity in Africa, but with a rapid population growth and a fast growing consumer sector, we’re seeing more companies requiring growth capital. The growth of private debt in the region is a promising long-term trend and we want to be part of this story in the future,” El Solh said.