KKR announced its first deal in Saudi Arabia, the latest sign that demand for cash in the Gulf’s biggest economy is leading borrowers to seek out alternative sources of financing aside from banks.
The US investment firm is leading a refinancing of debt on a $750 million water treatment plant in Rabigh on the kingdom’s west coast. The owner of the plant, ACWA Power, is part-owned by Saudi Arabia’s sovereign wealth fund. The KKR-led financing is around $550 million, according to a person familiar with the matter.
KKR plans to expand in the kingdom and “deploy capital behind essential infrastructure,” Julian Barratt-Due, head of Middle East investing at the firm, said in a statement.
Several years of rapid mortgage-fuelled credit growth, along with lower oil revenue deposits from the government, have left Saudi banks struggling to write new loans, especially ones with long durations. It also comes as the government is cutting spending and PIF is putting pressure on its development projects to find other ways to fund their ambitions.
The deal caps a year of growing momentum for private credit in the region, where it was almost unheard of just a few years ago. Private credit firms are increasingly sensing an opportunity to step in and fill the gap while investing in projects that often have strong state backing. It also gives firms like BlackRock, KKR, and others who have traditionally raised more from the Gulf than they have invested in it, the opportunity to show they are keeping some money in the region.
— Matthew Martin