The new fund is part of Gulf Capital’s new credit business that will focus on providing liquidity and growth capital, and acquisition finance for private equity firms in the MENA and Turkey, said Dr Karim El Solh, the chief executive officer of Gulf Capital, who at a media roundtable elaborated on the salient features of the financial instrument.
Christopher Baines, the Managing Director and co-Head of Gulf Credit Partners, who has joined the firm to manage the business, said it “will fill an acute gap in the market for MENA financing by offering credit solutions to corporate and private investors as they grow the value of their businesses.”
A $250-300 million Credit Fund, “Gulf Credit Partners” he said will be launched by the end of the year following the regulator’s approval and an application has already been submitted. Unlike traditional asset-based lenders, the financing provided by Gulf Credit Partners could be based on the cash flows generated by the borrower, he said.
“As such, the financings will be flexible using various structures to meet borrowers’ need including longer maturities and more deferred repayment dates than those typically seen in traditional lending,” Baines said.
The fund would invest in loans, bonds, and convertibles etc in the fast growing MENA and Turkey. It would be domiciled in Cayman Islands, but it would be regulated by the Central Bank of the UAE also, as it would be offered to investors here.
Dr Karim explained that the fund’s tenor would be 10 years, while the investment period of the new financial instrument will be five years. It will offer a targeted yield of 15 per cent per annum.
Giving investors’ perspective he said, “Gulf Capital is going to commit up to $75 million to anchor this fund...We will be the primary investor, we love this product because it offers 15 per cent return per annum, of which around 10 per cent, is a cash income and the rest is equity upside.”
He called it a blended product, which is neither a loan nor equity.
The Gulf Capital chief executive said the institutional investors who are in desperate need of yields today, would be looking at this product, as banks offer up to 0.9 per cent return on one month deposits.
The Gulf Capital, which launched a $553 million GCC Equity Partners II Buyout Fund in 2009, has deployed 38 per cent of the proceeds, which will grow to 50 per cent by year end.
The chief executive officer said the new financial product is part of Gulf Capital’s plans to expand its assets under management to $1 billion in two years.
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