Private Credit in the Gulf Awaits Five Signals to Regain Momentum
(The East Bloomberg) – The Gulf’s private credit market requires more than just an improvement in investor sentiment to regain momentum. Alvarez & Marsal has identified five conditions that it believes will determine the timing of the broad return of institutional capital, as Saudi Arabia emerges as a key market for the growth of this type of financing amid expanding corporate and project needs for funding sources outside traditional banking channels.
In a new report, Alvarez & Marsal stated that a return to activity requires sustainable stability in the regional business environment, a return of the spread between sovereign credit default swaps and investment-grade debt instruments in the secondary market to their normal levels, and clear leadership from regional sovereign wealth funds through deals in which they act as the lead investor.
The conditions also include the return of political and marine risk insurance pricing and trade credit to more stable levels and standards, as well as the execution of a reliable, widely distributed reference transaction that can serve as a model for other deals.
These conditions are particularly significant for Saudi Arabia, where the need to diversify funding sources is growing in parallel with the scale of projects and investments in the Kingdom, opening up greater space for instruments such as private credit and securitization alongside banking financing and public debt markets.
The East Bloomberg noted in October 2025 that partnerships with the private credit sector and securitization markets have become tools capable of meeting the financing needs of Saudi companies outside traditional banking channels, according to officials at Golub Capital.
The role of sovereign capital gains particular importance in light of one of the five conditions specified in the Alvarez & Marsal report. In Saudi Arabia, the Public Investment Fund previously agreed to be a lead investor in a group of funds launched by Goldman Sachs’ asset management arm, targeting strategies that include private credit and public equities in Gulf Cooperation Council countries.
Such deals can help build a deeper market. The role of the sovereign investor is not limited to providing capital; it can also signal confidence in the market to international investors and help establish a track record of reference transactions that can be relied upon when pricing subsequent deals.
Kurt Davis, Managing Director and Head of Debt and Capital Markets Advisory for the Middle East and Africa at Alvarez & Marsal, believes that Gulf borrowers remain attractive from a fundamentals perspective, but credit committees are now assessing a wider range of future risks following recent regional developments.
He explained that private credit investors typically assess risks over a multi-year horizon, meaning that improved sentiment alone will not be enough to drive institutions back in force. According to Davis, investment committees need evidence of a return to normal operating conditions, risk pricing, and the infrastructure necessary to execute deals before deploying capital on a large scale.
The increased interest in this activity in the Gulf coincides with a broader shift in the strategy of global asset managers. Instead of viewing the region solely as a source of fundraising for funds investing elsewhere, an increasing number of them are now seeking opportunities to deploy capital within the Gulf markets themselves.
