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Distressed Debt Deals May Rise to 2009 Levels in Crisis-Hit Gulf
(Bloomberg) — The fallout of the coronavirus and oil-price collapse will offer a once-in-a decade opportunity for distressed debt investors in the Persian Gulf, according to Sancta Capital Group Ltd.
“2020 will present us with the most lucrative deep value and distressed debt investment opportunity set since the global financial crisis,” said Ahmad Alanani, chief executive officer of the company, which invests in the debt and equity of under-performing companies. “We have been refining an extensive target list of credits and equities in which to invest opportunistically and we expect that list to continue to grow.”
The retail, healthcare, education and real estate sectors will offer the most opportunities, he said.
The coronavirus is triggering waves of corporate stress and credit rating downgrades as multiple countries enforce nationwide lockdowns. The oil-rich Persian Gulf is facing a prolonged downturn as the pandemic and a historic crash in oil prices add to pressure on already strained finances.
Moody’s Investors Service has cut its outlook and ratings for sovereigns and companies from Saudi Arabia, the Arab world’s biggest economy, to Emaar Properties PJSC, one of the region’s largest listed developers, and port operator DP World.
More Restructurings
The region is likely to go through a fresh wave of corporate restructuring, especially in sectors with overcapacity such as tourism, hospitality, and entertainment, according to Sancta Capital’s Chief Investment Officer Gus Chehayeb.
“Fear, panic selling, and economic contraction will eventually make way for bargain hunting, asset reflation, and economic recovery,” he said.
Read more: Citigroup Sees Asset Sales Boosting $47 Billion Gulf Debt Binge
On top of the impact of low oil prices and the virus, companies are facing other challenges, which offer opportunities for distressed debt investors. Developers such as Emaar have been hit by a drawn-out property slump, while the United Arab Emirate’s largest hospital operator, NMC Health Plc, was last month placed in administration following allegations of fraud, leaving creditors with $6.6 billion in unpaid debt.
NMC Heads to Administration After Giving In to Creditor Demands
Sancta Capital has $130 million of assets under management in mainly the U.A.E., Kuwait, Egypt and Saudi Arabia.
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