Yahoo Finance Private Credit Titans Pack Middle East Flights to Chase Billions
(Bloomberg) -- Jostling for space in the first-class cabin of a flight from Abu Dhabi was a who’s-who of the private credit world: Apollo Global Management Inc.’s John Zito, Blue Owl Capital Inc.’s Doug Ostrover, Sixth Street Partners’ Josh Easterly and hedge fund manager Jason Mudrick.
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That the rivals — and sometime partners — found themselves sitting on the same red-eye back to New York in late 2022 was hardly a coincidence. One draw to the Gulf were NBA preseason games between the Atlanta Hawks and Milwaukee Bucks that attracted thousands to the Etihad Arena. The other: pots of cash at sovereign wealth funds and family offices.
Nearly two years on, the pilgrimage has become somewhat of a routine for managers vying for Middle East investors.
State-owned funds in the Gulf have become a driving force behind the breakneck growth in the $1.7 trillion private credit market, even as higher interest rates have started to put pressure on borrowers that binged on debt. Investors in the region are enthusiastic about returns from an asset that’s outperformed private equity and public credit, according to market participants who regularly deal with them.
“Interest in private credit has exploded in the last two, three years and that’s because the credit markets are giving equity-like returns,” said Mohamed Mughal, CEO of First Forte Consultancy, which matches specialist managers with institutional investors and family offices in the Gulf. “We’ve never seen that before.”
Wall Street is enthusiastic, too. Some Gulf investors can write checks worth more than $1 billion to single funds, while larger family offices can invest hundreds of millions, the market participants said. The region’s investors were the biggest financiers of private market transactions among sovereign wealth funds last year, according to data from Global SWF.
Individual sovereign wealth funds have seeded entire new strategies, as in the case of Mubadala Investment Co.’s partnerships with Ares Management Corp. and Abu Dhabi Investment Authority’s commitment to the private credit tie-up between Barclays Plc and AGL Credit Management.
Details of the October trip were recounted by passengers on the flight who asked not to be identified. Representatives for Apollo, Blue Owl, Sixth Street and Mudrick Capital Management declined to comment.
Frequent Flyers
Cracking into the Gulf wealth network requires a lot of commitment — and air miles.
Before investment consultant bfinance International Limited opened its Dubai office, staff were traveling to the region more than 20 times a year, the company’s CEO David Vafai said. Stories of placement agents and fund managers attending dinners with wealthy investors and their extended family are common.
“In the region, relationship building is more of a requirement,” said Vafai. “It’s a trust-building exercise. They want to make sure you’re committed.”
The arrival of private credit is a logical next step for a region that’s already drawn hedge funds, crypto firms and Russian billionaires in search of deep-pocketed business partners. Among the latest entrants, private credit lender Monroe Capital is opening an office in Abu Dhabi after hiring a head of Middle East distribution. Blue Owl and Hayfin Capital Management are also expanding in the region.
Private credit for Gulf businesses remains a small market, which the region’s rulers are hoping to change. They’re also hoping for some reciprocity with international firms investing some of their profits back into the region.
Read More: Not a Wallet — Middle East Wants Investment Too
Partnerships in private credit can also be a springboard to attract capital to the region, and eventually establish a local network of private lenders. Mubadala and the Abu Dhabi Investment Authority have formed such ventures to strengthen their presence in private credit.
Local banks are already looking for ways to join the private credit boom, offering to play matchmaker to funds and allocators. National Bank of Kuwait Group’s private markets division, recently purchased by Janus Henderson, is one of the largest regional direct lenders with $1.1 billion in capital commitments to date.
“Investors and banks from the Gulf region remain liquid and are eager to diversify both in the public and private debt markets,” said Chiradeep Deb, global head of investment banking at Mashreq Bank. “We feel we have a role to play in this.”
Deals
Blackstone Inc. and Goldman Sachs Asset Management are providing the biggest portions of a roughly $900 million direct loan to Depot Connect International as it refinances more expensive private debt
Business development companies, including Morgan Stanley Direct Lending Fund and Blue Owl Credit Income Corp. are getting in on a borrowing spree in the booming US investment-grade market
Bondholders to Dish Network last month fired off a warning to potential private credit lenders: Stay away from the satellite TV provider or face litigation
Sixth Street Partners led a $475 million credit facility for Apellis Pharmaceuticals, which will use the proceeds to refinance debt
Carlyle Group Inc. is providing over $400 million of private credit loans to Big Bus Tours
KKR & Co. is in talks for a new loan with private credit lenders for MYOB, an Australian accounting software firm that the private equity giant acquired in 2019
A small group of three private credit lenders will provide a $2.65 billion credit facility to help finance Permira Holdings’s $6.9 billion acquisition of Squarespace Inc.
KKR & Co. and Apollo Global Management Inc. are providing a more than $1 billion direct loan to private equity-owned ASC Engineered Solutions, winning the deal over Wall Street banks
A group of private credit lenders led by Oak Hill Advisors is in discussions to provide about $1 billion of debt to support Vista Equity Partners’ acquisition of Model N
Blackstone Inc. has provided debt financing to support Francisco Partners’ purchase of Jama Software Inc., a Portland, Oregon-based maker of product development software
European cocoa supplier Natra is in conversations with lenders, including private credit funds, to finance a potential purchase of two businesses
Ares Management Corp. and Tor Investment Management won a Singaporean court ruling that found an Indonesian borrower in contempt over a $200 million private credit loan, marking a rare win for direct lenders grappling with legal complexities in Asia
Fundraising
Private credit firm Kadita Partners has raised more than $100 million for the first close of its maiden investment fund
AlbaCore Capital LLP is raising funds for a new strategy that seeks to buy up junk-rated tranches of collateralized loan obligation
Goldman Sachs Group Inc.’s alternatives business raised $3.6 billion for its latest real estate credit fund, giving it firepower at a time of market dislocation
India’s inclusion into JPMorgan Chase & Co.’s bond index will give a boost to its private credit markets by providing a benchmark for investments and attracting more inflows
Job Moves
Blue Owl Capital Inc. has hired Haitham Abdulkarim to oversee the company’s institutional business in the Middle East, where he’ll focus on scaling investment and operations teams across Abu Dhabi and Dubai
The former head of global operations at Barings asked a judge to keep her out of a lawsuit brought by the investment manager over the defection of herself and several other employees to upstart Corinthia Global Management
Brinley Partners, a private credit firm with more than $4 billion of assets under management, hired Rex Chung, most recently a partner at Hunter Point Capital
DB Investment Partners Inc., an investment manager launched by Deutsche Bank AG last year, has appointed Dhruva Agarwal as head of India to tap the fast-growing private credit market in the country
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--With assistance from Nicolas Parasie.
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