NBK teams with GSC on Middle Eastern mezzanine fund

The firms have held a $150m first close and expect to raise $200m by the end of the first quarter.

The NBK Capital GSC Mezzanine Fund has held a first close on $150 million (€117 million). A joint venture between NBK Capital, a division of the National Bank of Kuwait, and US alternative asset manager GSC Group, the fund intends to profit from the lack of available debt for private equity deals in the Middle East.

Mezzanine debt, which is generally unsecured and subordinated to other company debt, yields a high percentage of interest. Securing mezzanine debt is a higher risk for the debt holder, which typically pushes up the rate of return, which is why it is more expensive than bank debt.

The fund will invest in mid-market companies across all sectors, with market values of between $10 million and $20 million. NBK intends to increase the size of the fund to $200 million by the end of the first quarter of 2009.

NBK’s maiden private equity fund manages $250 million in commitments. Last year it raised a $125 million Kuwait-dedicated fund, and also launched a fund of funds in India.

GSC manages $20 billion in alternative assets. Last year it closed its third distressed-for-control fund on $530 million and a European collateralised debt obligation fund on €300 million.

The firms have been working together for 8 years to raise the fund, acccording to Bloomberg.