Private financing increasingly prominent among GCC issuers: S&P Global Ratings

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 $54.8bn, from $10.4bn between 2015 and 2019, and is set to rise further.

In the next few years, we anticipate private capital financings in GCC countries will gain further importance, considering higher interest from private capital providers in the region.

The number of transactions that were financed with private capital peaked at $20.4bn in 2023, however, this decreased to $14.5bn in 2024 (see 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 (see chart 1), which is indicative of the strong fundamentals that underpin the increase in private capital financings.

Bonds continue to dominate

We analysed the data related to financing raised by GCC issuers over the past decade. We specifically 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.

Based on our analysis, GCC issuers, including GCC governments, raised $3.5tn over the past decade (see chart 2). Bond issuances, which accounted for 51 per cent of the total amount raised in 2024, constituted the preferred method of financing, followed by financing from banks, which contributed 26 per cent.

In addition, three other asset classes experienced a significant increase in GCC issuers’ funding mix: sukuk issuances accounted for 19 per cent of the amount raised in 2024, equity capital market transactions – such as IPOs – or 6 per cent, and private capital financings for 3 per cent.

 

Focus on large deals

Private companies received most of the private capital financing and those investments concentrated on the largest deals.

Over the past decade, the top 10 transactions accounted for almost 80 per cent 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.

Both large corporates and GREs will continue to optimise their funding mix and seize opportunities, while smaller companies will increasingly turn to private financings, particularly if they are at an early development stage.

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 per cent of private financings in December 2024, up from 31 per cent in 2015 (see chart 3).

Private financing can help early-stage firms

Even though these established companies could have easily raised the required funding from banks or 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 region because the overall volume of private financings remains relatively small.

On the demand side, private capital financing 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.

The writer is the MD and Financial Institutions Sector lead at S&P Global Ratings (for the emerging EEMEA region).

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