In a recent fireside chat, Victoria Mesquita, Partner at Curtis, Mallet-Prevost, Colt & Mosle LLP, shared her insights on the private credit market in the Middle East and North Africa (MENA) region. Here are the key takeaways from the discussion:

Market Overview

The private credit market in MENA is growing, driven by the economic boom in the region, particularly in Saudi Arabia, and improvements in the legal framework. The market is still in its early stages, with a focus on complex credit and SMEs, which are not catered to by commercial banks.

Main Players and Products

The main players in the private credit market in MENA are local and international private credit funds, with a growing presence of foreign funds. The most common products are direct lending, unitranche, mezzanine, and venture capital.

Barriers to Entry

The legal framework in MENA has improved, making it easier for funds to set up shop in the region. However, there are still onerous requirements, and some private credit funds find the regulations challenging.

Financeable Companies

The ideal candidates for private credit are companies with strong receivables, growth companies with strong fee sponsors, and those involved in leveraged acquisitions. SMEs and growth companies often require education on private credit, and law firms play a crucial role in structuring deals.

Role of Law Firms

Law firms in MENA need to be more hands-on and commercial, working closely with private credit funds to structure deals. They need to be involved from the outset, helping to create new structures that haven’t been used before in the region.

Origination of Deals

Deals are originated through a network of private credit lenders, issuers, and borrowers, as well as through connecting players and originating deals.

Future Outlook

The private credit market in MENA is expected to grow, with larger ticket sizes and more standardization of deals. Securitization-type strategies are expected to become more prominent, particularly in the growth company space. The role of intermediaries, such as financial advisors, will remain important, with collaboration between law firms and financial advisors being key.

Challenges

High interest rates may make private credit less attractive, but on the other hand, they may also make alternative assets more appealing to investors.

Overall, the private credit market in MENA is poised for growth, driven by the region’s economic boom and improvements in the legal framework. Law firms will play a crucial role in structuring deals and connecting players, while private credit funds will need to adapt to the changing market landscape.

Timeline:

1. 10-15 years ago: Private credit market in MENA began to take shape
2. 5 years ago: Exponential growth in the number of private credit players in the region
3. Present day: Market is still growing, with a focus on complex credit and SMEs
4. Next 10 years: Expected growth, standardization, and increased use of securitization-type strategies

Key timestamps:

00:09: Introduction
00:41: Victoria Mesquita’s Background and Role
02:27: Private Credit in the Middle East
05:51: Regulation and Disintermediation of Banks
07:08: Impact of Regulations on Private Markets
08:06: Barriers to Entry for Private Credit Funds
09:24: Financeable Companies for Private Credit Funds
10:52: Leverage Acquisitions and Market Potential
12:49: Educating SMEs on Private Credit
14:53: Role of Law Firms in Private Credit
16:34: Originating and Structuring Deals
17:53: Future Role and Market Evolution
18:31: The Role of a Lawyer in Private Credit
19:41: Growth and Transactions in Private Credit
20:24: The Importance of Networking for Lawyers
21:06: Characteristics of an Ideal Lawyer
22:27: Bullish Structures in Private Credit
23:21: Role of Intermediaries in Private Credit
24:03: Outlook for Private Credit in the Middle East