Moody’s credit rating agency stated that the strong economies and resilient business models of Gulf countries continue to support corporate credit quality, despite ongoing geopolitical tensions.
Antonio Aquino, Head of Banking for the Middle East and Africa at Moody’s, stated that banks continue to dominate the borrowing landscape in the GCC, while private credit remains in its early stages.
Aquino noted that several GCC sovereign wealth funds have shown growing interest in private credit and have partnered with alternative asset managers in the U.S. to invest capital outside the region.
However, Aquino added that there is increasing interest from foreign investors in establishing investment vehicles, including private credit, in the region. This interest is driven by the strong financing needs arising from the Gulf countries’ economic transformation plans.
Aquino further stated that the ongoing economic reforms in the Gulf region will incentivize more government investors seeking returns to allocate capital to private credit within the region.
Bank Financing
Zawya reported on its website that small and medium-sized enterprises (SMEs) in the Gulf countries face challenges in obtaining bank financing, creating opportunities for the growth of private credit.
The report highlighted increasing interest in private credit beyond the U.S., with more asset managers focusing on the Gulf region and local investors drawn by attractive returns and the presence of major companies.
Anders Persson, Chief Investment Officer for Fixed Income at Nuveen Asset Management, noted that private credit in the U.S. saw significant growth after the 2008 financial crisis as increased banking regulations led capital markets to step in and address funding needs.
Persson added that the U.S. private credit market has grown to $1.5 trillion, and a second phase of expansion has been observed in Europe, where risk-based capital pressures have caused banks to underperform, and thereby allowing private credit lenders to step in and bridge the financing gap.
Andy Frank, Managing Director and Head of Private Credit at Fortress Investment Group, emphasized that business regulations and bankruptcy laws play a crucial role in fostering the healthy growth of the private credit asset class and the SME market.
Frank concluded by stating that his company has successfully raised substantial capital in the Gulf region and has significant experience in the SME sector. He emphasized that transparency, auditing, and reporting are essential for the success of SMEs in the region, which could be further strengthened by reforms such as the introduction of a corporate tax.
Source: Al Qabas
