PE firms may fund Saudi Arabian deals

International private-equity groups considering investments in Saudi Arabia may seek to provide financing for deals since Saudi investors have become more cautious, according to Clive Rates, Managing Director of the Investment Banking Advisory at HSBC Saudi Arabia.

Private-equity firms can provide capital because the Saudi "family money is a lot more cautious than it has been", Rates said in an interview on the sidelines of the Euromoney Saudi Arabia 2009 conference in Riyadh.

"There is a big role for private equity in the Kingdom," Rates said. "We talk to more 20 private equity funds, all of whom are looking for opportunities in similar sectors especially those related to consumer expenditure."

Egypt, Saudi Arabia and the UAE were the largest recipients of private-equity investment for the past four years, according to the Gulf Venture Capital Association.

"At the moment, there are definitely more buyers than sellers," Rates said. "There's far too much money trying to find a way into the Kingdom."

However, Saudi Arabia's Transport Minister Jebarah Bin Eid Al Suraisry said due to higher cost of private sector borrowing, the country was using state funds to push them forward all transport projects.

He said the Kingdom allocated SR12 billion (Dh11.75bn) in its budget for some road and ports, underpinning the state's plan to keep public funds flowing into key infrastructure projects.

Suraisry said Saudi Arabia had not noticed less interest from the private sector in its road, port and railway projects. But tight credit conditions globally had raised the cost of funding for private sector partners, increasing overall project costs.

"After studying the options, it was clear that government funding for the projects is less costly during these times," Suraisry said.

The Saudi Government accumulated huge surpluses during a six-year oil price boom, giving it leeway to keep spending high even if it means posting a fiscal deficit and tapping into the $411bn its central bank holds in foreign assets.Saudi Arabia, meanwhile, would look at how to finance a new bridge connecting the east and west of the country "very soon", and a plan to expand the capacity of the Jeddah port by 45 per cent would be concluded in Q4, the minister said.

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