UAE-based Gulf Capital’s credit fund halts investments after staff departures

Gulf Capital is hiring investment staff after several senior departures in recent months, including two that sources close to the matter said have forced the Middle East private equity firm’s credit fund to suspend new investments.

The United Arab Emirates-based firm has emerged as one of the largest private equity players in the region with $3bn of assets under management.

Gulf Capital has hired 15 people in the past year and a half, CEO Karim El Solh said in response to Reuters’ questions on staff departures, and plans to add up to eight investment professionals in 2019.

At least seven employees, including four managing directors, have left Gulf Capital in the past year and a half, said the four sources, who declined to be named because of commercial sensitivities.

The sources said dissatisfaction with the firm’s leadership structure and investment decisions, as well as concern over an excessive build up of debt, were among the reasons for some staff leaving.

“Attrition rates at Gulf Capital over the years are very much in line with the industry,” said El Solh.

“In fact, on a net basis, we have grown and expanded our investment and operating team over the last two years.”

The CEO added that the firm had the largest and most qualified alternative investments team in the region, with more than 30 investment professionals.

KEY MAN CLAUSE

The resignations of Walid Cherif and Fidaa Haddad, the heads of Gulf Capital’s credit fund, triggered a so-called key man clause that has stopped the fund investing, the sources said.

Gulf Capital would not comment on any such contractual clause, which would stop a fund manager from making new investments if one or more key employees are unable to devote the required time to the investment.

Christopher Foll, formerly chief financial officer, has moved to become senior managing director of the credit fund, with finance director Wissam Daoud promoted to CFO, El Solh said.

Gulf Capital will soon announce a new managing director for the fund, he said, adding that Cherif remains an adviser to credit portfolio companies where needed.

Gulf Credit Opportunities Fund II announced on Wednesday a $22m investment in Tunisian olive oil producer CHO Company, though one of the sources said the deal process had started before the key man clause was enacted with Cherif’s departure in November.

“Overall, 2019 looks like it will be a very productive year for us and we are very focused on execution over the next two quarters, said El Solh.

“We are in the process of announcing a number of new investments and strategic exits in the first half of 2019, continuing the strong pace of activity witnessed in 2018.”

Gulf Capital said in May that it aims to invest $350m over the next two years in areas such as consumer-led sectors and renewable energy.

Among the 15 new hires is former Abraaj private equity director Hazem Abu Khalaf, El Solh said, adding that Gulf Capital has also made 15 internal promotions.

In 2019 it will add two more investment directors and an additional five or six people across its private equity and credit businesses, he added.