The Saudi Public Investment Fund (PIF) has become a major investor in a new $300 million shariah credit fund launched by NBK Capital Partners (NBKCP) that will provide capital to mid-market companies in the Middle East.
The actual stake taken by the fund, which manages $400 billion in assets, was not disclosed but NBKCP said it was a nine-digit figure, meaning at least a third of the targeted $300 million.
PIF, which largely invests in equities and infrastructure, is making a rare venture into the debt market, reported Reuters.
Senior Managing Director Yaser Moustafa told Reuters that NBKCP can touch parts of the economy that PIF can’t touch as efficiently, so “we end up being sort of this force multiplier for them in terms of getting capital into pockets efficiently.”
Moustafa expects returns within the range of 15 percent from NBKCP’s fund investments, adding that similar returns are also predicted from the shariah fund.
“We’re looking at anywhere from 8-10 percent in that cash coupon,” he said.
European and US institutional investors also invest in the fund, which is expected to take 10 to 12 investments of $15 million to $50 million over its eight-year life.
NBKCP, owned by Kuwait’s biggest lender, has had two previous private credit funds.
The first fund is worth $157 million established in 2007 that lent to eight companies and from which it has exited, while the second is worth $160 million, the vast majority of which has been invested.
NBKCP’s credit and equity funds have invested in 35 companies, including 17 consecutive profitable exits.
After a year or two, the principal starts to repay and, generally, the borrower agrees to return a certain percentage on the funding when it matures, usually in four or five years.
Private credit funding is more expensive than bank loans, but borrowers might not have access to bank credit.
NBKCP’s funds have invested in education, food and beverages, healthcare, and logistics.
They generally invest in companies with Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) between $4 million and $100 million.
