Abu Dhabi’s Gulf Capital backs rebound in Egypt oil sector with $25m investment

The investment is in the form of structured notes, which carry an interest rate but also have an 'equity kicker' that gives Gulf Credit Partners the benefit of any gains in Amak’s equity without taking a direct stake.

The Abu Dhabi-based asset management firm Gulf Capital has backed the view that Egypt's energy sector is on the rebound, with a US$25 million investment in Amak Group.
Gulf Capital, which has $3 billion of assets under management, is making the investment via one of its four funds, Gulf Credit Partners. The fund specialises in mezzanine financing – hybrid debt-equity that is aimed at funding established private companies in a growth phase of their development.
The Cairo-based oil services company Amak fits that bill, according to Walid Cherif, manager of the Gulf Credit Partners fund, which has about $220m in assets.
Mr Cherif said Gulf Capital's overall strategy is to invest in non-cyclical industries – including oil and gas services, education, health care and consumer goods – staying away from volatile sectors such as real estate and construction materials.
The Amak investment is in the form of structured notes, which carry an interest rate but also have an "equity kicker" that gives Gulf Credit Partners the benefit of any gains in Amak's equity without taking a direct stake – typical for mezzanine, but still fairly rare in the region.
The Gulf Capital investment follows a number of positive developments for Egypt's economy since the new government under the former general Abdel Fattah El Sisi was formed this year.
This week Egypt has begun making good on its promise to pay companies, including BG Group and BP, more than $6bn in arrears for oil and gas deliveries, which had accumulated as the country descended into chaos after the Arab Spring uprising in 2011.
Last week, Sharjah-based Dana Gas signed a deal that will allow it to get arrears paid and invest $270m to develop new natural gas assets in Egypt.
"That is exactly what we're looking at – the developments in the oil and gas sector – and Amak's position to benefit from that," said Mr Cherif.
He said Gulf Capital is still cautious about Egypt generally, but more optimistic that it is on the right track. "Unemployment, the stability of the currency, the debt situation – those are issues that are going to be there for a while. But the current government is well aware and has embarked on a number of reforms to attract foreign investors and that will help."
There have been encouraging signs on Egypt's economy, including an improvement in foreign direct investment.
Having collapsed in 2011 to a negative outflow of $480m, from inflows of about $6.5bn in each of the previous two years, foreign direct investment (FDI) has only slowly recovered and was about $5.5bn last year, according to World Bank data.
Last month, Egypt's investment minister, Ashraf Salman, said the country is hoping to push FDI to $10bn this fiscal year.
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