Shorooq Partners targets startups with private credit fund

Shutterstock/Peopleimages.com

• Shorooq launches $100m fund
• Average loan value $10m
• Predicted 13% return

A $100 million private credit fund from Abu Dhabi’s Shorooq Partners will lend to Gulf startups and medium-sized companies that possess tangible assets or generate strong, recurring cashflows, a senior executive told AGBI.

The firm’s second private credit fund made its first close in late May. Its minority partner is South Korea’s IMM Investment Global, while other investors include asset managers, corporations and family offices.

Most of these investors, known as limited partners, are from the GCC, such as Tharawat Holding. Prince Turki bin Salman Al Saud, a full brother of Saudi Arabia’s crown prince Mohammed bin Salman, owns Tharawat.

---

---

“We invite all startups and SMEs in the region who are looking for credit to come to us,” said Nathan Kwon, a principal at Shorooq Partners. “We would love to work with the best founders out there and enable their growth.”

Shorooq will lend to companies that meet one of two criteria. Either the borrower must have tangible assets such as equipment, property or factories to which a certain value can be ascribed, or it must generate strong, often contractually agreed, cashflows.

The first type of borrower includes industrial and manufacturing companies, while the likes of commerce, logistics and financial platforms are examples of the second.

Shorooq Partners

Borrowing companies have usually been operational for three to five years, although their age is not a deciding factor.

Shorooq’s first credit fund, which launched in 2021, lent to businesses such as agriculture technology company Pure Harvest and Saudi Arabian buy-now-pay-later provider Tamara.

The second fund’s typical loan value will be up to $10 million so that it is not overly concentrated in a few companies. Such a strategy diversifies and reduces risk, Kwon said.  

Shorooq’s lending is focused on the GCC, particularly Saudi Arabia and the UAE, although it does consider opportunities further afield on an ad hoc basis.

• Hopes high for Egypt’s shariah-compliant index
• Agriculture startups failing to cultivate VC interest
• Saudi Arabia campaign aims to attract chipmakers

“The companies we look at usually do not qualify for bank loans,” said Kwon. “Banks tend to be conservative, so there’s a huge gap when it comes to credit financing [for] startups and SMEs in the region.”

Kwon predicts the second credit fund will provide a net internal rate of return of 12-13 percent. It will generate this mostly through borrowers’ interest payments and will deploy its capital over the next three years.

Its funds have an investment period of two to three years and a full life cycle of four to five years, by which time investors will have received their initial money back, plus the projected yield.

“From the moment we make the investment until the entire loan is repaid, there are regular coupon payments which we distribute back to the LPs,” added Kwon. “Once the amortisation period starts, we also start to get back the principle of the [loans] in instalments.”