2025-10-28
Private Credit Titans Eye Opportunity in Saudi Liquidity Squeeze
The titans of private credit are beginning to jockey for deals in Saudi Arabia, where liquidity in the banking system has been drained by the kingdom’s ambitious economic diversification projects.
From giants like Goldman Sachs Group Inc and Apollo Global Management Inc to state-backed investors and smaller asset managers, firms are positioning for opportunities in the country, where private credit was largely non-existent just a year ago.
“In some cases, banks are even referring deals to us because they’re unable to finance them,” said David Beckett, head of origination and Middle East business development at the asset manager SC Lowy. “Private credit, in general, is essential.”
Private credit has boomed to become a $1.7tn market globally. But the need for such financing is more acute in Saudi Arabia, where local banks are helping finance the Vision 2030 plan that’s meant to reduce the kingdom’s reliance on oil and make it a more attractive place to live, work and travel.
That’s crimped their ability to offer financing to other companies and projects across the country. As a result, medium-term loans in Saudi Arabia dropped for the first time in three years last quarter.
Opportunities for private credit will likely to be a hot topic for finance executives gathering in Riyadh in the coming days for the kingdom’s flagship Future Investment Initiative summit. Executives are expected to focus on the size of the financing gap for companies and how their needs will shift as the government re-jigs its spending strategy, in part to focus on high-priority initiatives like event infrastructure and housing.
“Gulf banks’ liquidity will be challenged by oil below $65 a barrel, especially in Saudi Arabia as the kingdom needs $113 per barrel to balance its budget and fund domestic spending. Lower US rates could be ROE-accretive for Saudi lenders but tightening liquidity, which continues to be an issue, has offset one-third of the 125 bps in Fed interest rate cuts since last year,” says Edmond Christou, Senior Industry Analyst, Bloomberg Intelligence.
The liquidity squeeze is showing up in all corners of the market: One local developer said it was recently denied a bank loan, while another was told by at least two Saudi lenders they couldn’t offer financing.
“The critical issue remains the tightness in the domestic liquidity with credit demand outstripping deposit growth,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC. “Competition for deposits will remain strong and access to external borrowing will remain important for banks to raise funding.” There are signs that crunch may linger. Saudi Arabia is still advancing hundreds of billions of dollars worth of diversification initiatives, from tourism projects to construction of mass data centres. That’s led many Saudi firms to hunt for alternative sources of funding.
“The liquidity constraints and capital situation of the domestic banks create a real opportunity and it’s something that a lot of international banks are looking at,” said Farouk Soussa, Goldman’s Middle East and North Africa economist. “Private credit is an area that has opened up.”
The Wall Street bank is among firms looking to cash in, and is relocating one of its top private credit executives from London to the Middle East to help with the effort. Saudi Arabia’s Public Investment Fund recently agreed to anchor a series of new funds brought by Goldman’s asset management unit that will focus on both private credit and public equity strategies across the six Gulf Cooperation Council countries.
Firms like Golub Capital and Blue Owl are also actively expanding in the region. Meanwhile, HSBC Holdings Plc-backed Saudi Awwal Bank is planning its first private credit fund focused on the Middle East and Partners for Growth, an early lender to fintech unicorn Tabby, has made the kingdom the focus of its regional private credit push.
Private credit is a natural fit for Saudi Arabia’s middle-market companies that can’t yet tap the public market and are increasingly being shunned by local banks, according to Marc Pinto, global head of private credit at Moody’s Ratings.
“There’s a lot of talk about how great financing needs are in Saudi Arabia so I get the sense there are bigger deals coming,” Pinto said in an interview in Riyadh this month.
From giants like Goldman Sachs Group Inc and Apollo Global Management Inc to state-backed investors and smaller asset managers, firms are positioning for opportunities in the country, where private credit was largely non-existent just a year ago.
“In some cases, banks are even referring deals to us because they’re unable to finance them,” said David Beckett, head of origination and Middle East business development at the asset manager SC Lowy. “Private credit, in general, is essential.”
Private credit has boomed to become a $1.7tn market globally. But the need for such financing is more acute in Saudi Arabia, where local banks are helping finance the Vision 2030 plan that’s meant to reduce the kingdom’s reliance on oil and make it a more attractive place to live, work and travel.
That’s crimped their ability to offer financing to other companies and projects across the country. As a result, medium-term loans in Saudi Arabia dropped for the first time in three years last quarter.
Opportunities for private credit will likely to be a hot topic for finance executives gathering in Riyadh in the coming days for the kingdom’s flagship Future Investment Initiative summit. Executives are expected to focus on the size of the financing gap for companies and how their needs will shift as the government re-jigs its spending strategy, in part to focus on high-priority initiatives like event infrastructure and housing.
“Gulf banks’ liquidity will be challenged by oil below $65 a barrel, especially in Saudi Arabia as the kingdom needs $113 per barrel to balance its budget and fund domestic spending. Lower US rates could be ROE-accretive for Saudi lenders but tightening liquidity, which continues to be an issue, has offset one-third of the 125 bps in Fed interest rate cuts since last year,” says Edmond Christou, Senior Industry Analyst, Bloomberg Intelligence.
The liquidity squeeze is showing up in all corners of the market: One local developer said it was recently denied a bank loan, while another was told by at least two Saudi lenders they couldn’t offer financing.
“The critical issue remains the tightness in the domestic liquidity with credit demand outstripping deposit growth,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC. “Competition for deposits will remain strong and access to external borrowing will remain important for banks to raise funding.” There are signs that crunch may linger. Saudi Arabia is still advancing hundreds of billions of dollars worth of diversification initiatives, from tourism projects to construction of mass data centres. That’s led many Saudi firms to hunt for alternative sources of funding.
“The liquidity constraints and capital situation of the domestic banks create a real opportunity and it’s something that a lot of international banks are looking at,” said Farouk Soussa, Goldman’s Middle East and North Africa economist. “Private credit is an area that has opened up.”
The Wall Street bank is among firms looking to cash in, and is relocating one of its top private credit executives from London to the Middle East to help with the effort. Saudi Arabia’s Public Investment Fund recently agreed to anchor a series of new funds brought by Goldman’s asset management unit that will focus on both private credit and public equity strategies across the six Gulf Cooperation Council countries.
Firms like Golub Capital and Blue Owl are also actively expanding in the region. Meanwhile, HSBC Holdings Plc-backed Saudi Awwal Bank is planning its first private credit fund focused on the Middle East and Partners for Growth, an early lender to fintech unicorn Tabby, has made the kingdom the focus of its regional private credit push.
Private credit is a natural fit for Saudi Arabia’s middle-market companies that can’t yet tap the public market and are increasingly being shunned by local banks, according to Marc Pinto, global head of private credit at Moody’s Ratings.
“There’s a lot of talk about how great financing needs are in Saudi Arabia so I get the sense there are bigger deals coming,” Pinto said in an interview in Riyadh this month.
Big players like KKR & Co Inc and Apollo are “sniffing around” but need a deeper understanding of where the funding needs are greatest, he added.
Source: GULF TIMES