UAE-based alternative investor Gulf Capital has collected about $205 million in commitments for its second credit and mezzanine vehicle and expects to exceed its $250 million target by June, Gulf Capital senior managing director and head Gulf Capital Credit Partners Walid Cherif told Private Equity International.
Gulf Credit Opportunities II has a hard-cap of $300 million. The fund's 2012-vintage predecessor closed on $220 million, overshooting its $200 million, according to PEI Research & Analytics.
As well as its typical Gulf-based institutional investors, including sovereign wealth funds, insurance companies, pension funds, and family offices, and the International Finance Corporation, the new fund is also talking to an Asian sovereign wealth fund that already has a relationship with the firm through its private equity funds, and a European institution, Cherif said.
Investors are aware of the dislocation between liquidity available in the regional banking system and demand for financing from the private sector, in particular small and medium enterprises, which receive only eight percent of regional bank lending, Cherif said.
There are a number of financially stressed opportunities across sectors affected by the drop in the oil price, where companies are struggling to refinance their debt or renew bank facilities, Cherif said. “That is creating a huge opportunity for private debt and investors see that.”
The fund will target investments in the Middle East and North Africa, Turkey and Sub-Saharan Africa of $10-30 million and is eying its first co-investment in a $50 million transaction. “This is a new thing for us,” he said of co-investing.
The demand for co-investment is driven by larger companies looking for financing options that tend to be $50 million-plus, and “we don't want to miss out because of the kind of returns we're looking for”, Cherif said, while the fund has also identified a number of investors that prefer to invest directly and not through blind pools.
The firm also sees future potential growth on the direct lending side in the senior secured capital space. “There is a huge opportunity there,” he said. “We are looking at that seriously”.