Jefferies Joins Wall Street Peers in #Saudi Private Credit Push - Bloomberg

Jefferies Joins Wall Street Peers in Saudi Private Credit Push - Bloomberg

Jefferies Financial Group Inc. is making its first foray into Saudi Arabia’s private credit space, leading a $125 million financing deal for finance startup Erad.

The investment bank and co-investor Channel Capital are providing an asset-backed, scalable facility that will allow Erad to boost its lending to domestic small-and-medium sized companies through its platform, according to a statement from the Riyadh-based firm.

With the Erad deal, Jefferies joins a raft of major Wall Street investment banks pursuing private credit opportunities in the kingdom and the broader Gulf region. Two months ago, Saudi buy-now, pay-later unicorn Tamara secured a major asset-backed facility of as much as $2.4 billion from several finance firms including Goldman Sachs Group Inc. and Citigroup.

Until recently, private credit as an asset class barely existed in Saudi Arabia. But the country’s corporates are increasingly turning to alternative forms of financing as domestic banks are constrained by the funding needs created by the country’s mammoth economic overhaul.

The need for new sources of funding is especially pressing in the SME sphere, where companies struggle to receive backing from local banks. Erad said that the Gulf’s SMEs form “the backbone” of the region’s diversification efforts but that “despite their critical role” they face a $250 billion financing gap limiting their growth potential.

The deal “demonstrates the strategic importance of alternative finance in supporting the Kingdom’s goal of SME growth,” said Erad’s co-founder Salem Abu-Hammour.

The facility will help Erad meet the growing demand from SMEs in the Gulf and broaden its reach beyond traditional consumer sectors into manufacturing, logistics, distribution, and real estate services. Earlier this year, Erad already secured $33 million through a debt financing round led by Stride Ventures.

For Jefferies, it’s the bank’s first asset-backed financing transaction in Saudi Arabia, a deal that will also boost its presence in the kingdom. The New York-based investment bank has been beefing up its presence in the Middle East in recent years.