Key Takeaways
- Private capital financings are becoming an important funding source for issuers in the Gulf Cooperation Council (GCC) region.
- For now, private financiers mainly focus on large transactions.
- Private capital financing can be an alternative funding source for companies that are underserved by banks.
Over the past decade, GCC issuers mainly relied on banks, bonds, and sukuk to meet their funding needs. The total amount of private capital financings raised by GCC issuers between 2020 and 2024 increased significantly to $54.8 billion, from $10.4 billion between 2015 and 2019, and is set to rise further.
S&P Global Ratings expects private capital financings in GCC countries will gain in importance over the next few years, particularly considering higher interest from private capital providers in the region. The number of transactions that were financed with private capital peaked at $20.4 billion in 2023 and decreased to $14.5 billion in 2024, compared with $1.3 billion in 2015 (see chart 1).
Chart 1
The steep decline over 2024 largely resulted from improving financing conditions in local banking sectors and bond and sukuk markets, and the decline in interest rates. Even so, the number of transactions in 2024 was still 2.7 times higher than in 2015, which is indicative of the strong fundamentals that underpin the increase in private capital financings.
Bonds Continue To Dominate
We analyzed the data related to financing raised by GCC issuers over the past decade. Concretely, we focused on financing from banks, bond and sukuk issuances, equity capital market transactions--such as initial public offerings (IPOs)--and private capital financings via private credit investments, private equity investments, venture financing, sovereign wealth fund investments, and other fund investments or credits.
Our analysis shows that GCC issuers, including GCC governments, raised $3.5 trillion over the past decade (see chart 2). Bond issuances, which accounted for 51% of the total amount raised in 2024, constituted the preferred method of financing, followed by financing from banks, which contributed 26%. Three other asset classes experienced a significant increase in GCC issuers' funding mix: Sukuk issuances accounted for 19% of the amount raised in 2024, equity capital market transactions--such as IPOs--for 6%, and private capital financings for 3% (see charts 2 and 3).
Chart 2
Chart 3
Private Financings Currently Focus On Large Deals
We note that private companies received most of the private capital financing and that investments concentrated on the largest deals (see chart 4). Over the past decade, the top 10 transactions accounted for about 80% of the total annual volume of private capital financings. What's more, large corporates, including government-related entities (GREs), were among the recipients of private capital financing.
Chart 4
We expect large corporates and GREs will continue to optimize their funding mix and seize opportunities, while smaller companies will increasingly turn to private financings, particularly if they are at an early development stage.
Private Capital Is Targeting Banks' Clients For Now
Our analysis of private financing transactions shows that private financiers have expanded their reach over time to provide funding to more mature and established companies, not just those at early development stages. Established companies received 79% of private financings in December 2024, up from 31% in 2015 (see chart 5).
Chart 5
Even though these established companies could have easily raised the required funding from banks or on capital markets, they chose private financings, which could provide a faster or more streamlined execution, more flexible terms, or more competitive pricing. Nevertheless, we do not expect private capital to challenge the role banks play in the GCC region because the overall volume of private financings remains relatively small.
On the demand side, private capital financings can help early-stage firms and make them bankable over time, which fuels the financial ecosystem by creating more growth opportunities. Banks tend to be wary of providing loans to companies at early development stages, unless they benefit from external support or guarantees.
On the supply side, regional private capital providers for GCC corporates, including sovereign wealth funds, will continue to diversify their geographic exposure to avoid over-relying on a single economy or region. GCC investors will remain on the radar of large companies that aim to raise money outside of the traditional banking system or capital markets, especially when interest rates are high.
This report does not constitute a rating action.
| Primary Credit Analyst: | Mohamed Damak, Dubai + 97143727153; mohamed.damak@spglobal.com |
| Secondary Contact: | Dhruv Roy, Dubai + 971(0)56 413 3480; dhruv.roy@spglobal.com |
| Private Markets Analytics: | Michelle Ho, London 65322515; michelle.ho@spglobal.com |
| Evan M Gunter, Montgomery + 1 (212) 438 6412; evan.gunter@spglobal.com |
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