Ciaran Bohnacker
Partner
Dubai
Private credit is no longer a niche asset class in the Middle East. Amid bank retrenchment, regulatory shifts and increasing institutional appetite for non-correlated yield, private credit has moved to the mainstream. As managers scale their platforms, structuring needs are evolving.
With the ever-growing popularity in the deployment of private capital, the key question no longer appears to be just how to isolate risk at a transactional level, but how to build institutional architecture that enables scalability, repeat issuance, investor segmentation and operational efficiency.
This is the second in a series of our advisories exploring the rapid evolution of private credit in the Middle East. Our earlier publication, 'Orphan issuer vehicles in private credit transactions', examined the use of bankruptcy-remote structures in bespoke lending.
This advisory focuses on how Cayman Islands segregated portfolio companies (SPCs) are being used to build scalable, multi-strategy credit platforms.
From bespoke execution to institutional platforms
Historically, many private credit sponsors have executed transactions on a deal-by-deal basis using bespoke special purpose vehicles (SPVs). While effective for stand-alone deals, this model becomes operationally burdensome as deal volume increases.
As private credit managers develop repeat lending programmes (often across multiple jurisdictions, asset classes, or investor tranches) the demand for centralised platform structures has accelerated. These platforms must accommodate multiple discrete lending strategies while maintaining segregation of risk, investor-specific economics and structural protections.
Leveraging Cayman Islands SPCs for scalable, multi-strategy lending platforms
An SPC can create one or more segregated portfolios (SPs), each of which is statutorily ring-fenced. Assets and liabilities attributable to a particular SP are only available to the creditors and stakeholders of that SP. The general assets of the SPC, and the assets of other SPs, are not available to meet the obligations of a segregated portfolio.
This statutory segregation is recognised under Cayman Islands law and provides a useful tool for credit sponsors looking to house multiple exposures within a single legal framework. Crucially, an SPC may be used whether or not the vehicle is orphaned - allowing both ‘on’ and ‘off’ balance-sheet structures to benefit from statutory ring-fencing.
For market participants familiar with protected cell company structures in jurisdictions such as Jersey, Guernsey or Bermuda, the SPC model offers a comparable and intuitive framework. Each SP operates like a distinct “cell,” providing clear separation of risk and investor economics. This familiar architecture enhances confidence in the structure and supports efficient scaling of multi-strategy platforms.
The ability to consolidate multiple strategies under one legal umbrella entity, while preserving legal and economic separation between them, makes SPCs particularly attractive for sponsors seeking to institutionalise their platforms.
Use cases in the private credit market
Private credit managers are deploying Cayman Islands SPCs in a range of strategic contexts:
- Multi-strategy platforms: Sponsors use distinct SPs to allocate capital across senior, mezzanine and hybrid structures, allowing investors to select risk/return profiles tailored to their mandates.
- Jurisdictional separation: SPs may be dedicated to particular regions or borrower types (eg UAE real estate, Saudi infrastructure, European trade receivables), supporting regulatory and tax segmentation.
- Islamic and conventional parallel structures: Sponsors can operate both Islamic-compliant and conventional finance programmes through separate SPs under an umbrella platform, enabling operational efficiency while respecting Sharia principles.
- Co-investment sleeves: SPs are used to warehouse specific deals or tranches offered to co-investors outside the core fund structure, allowing for flexible syndication and alignment of interests.
- Efficient note issuance: Sponsors issue secured notes from individual SPs backed by credit portfolios, avoiding the need for new entities.
These use cases emphasise the versatility of SPCs in supporting both fund-style and deal-specific strategies, while maintaining the structural integrity required by institutional investors.
Governance and structuring considerations
While Cayman Islands SPCs offer significant flexibility and economies of scale / cost savings, their use requires careful attention to governance, legal drafting and operational execution. Key considerations include:
- Board composition: Directors must manage the SPC as a single legal entity while preserving the separateness of each SP. This includes managing conflicts of interest, ensuring proper delegation of authority and maintaining robust oversight across portfolios.
- Statutory obligations of directors: Directors are legally required to ensure that the assets and liabilities of each SP remain segregated. This includes maintaining separate accounts, records, and operational controls for each portfolio to uphold the statutory ring-fencing protections under Cayman Islands law.
- Security structuring: SP-specific security may be granted to lenders, but proper drafting is essential to avoid cross-contamination between portfolios. Security documents should clearly reference the relevant SP and include appropriate limitations on recourse.
- Accounting and tax treatment: Sponsors should consult with advisors to determine whether consolidated or discrete accounting treatment is appropriate. Tax implications may vary depending on whether the SPC is used on or off-balance sheet.
- Investor disclosure: Offering documents (if applicable) should clearly explain how the SPC operates, the ring-fencing mechanics and any residual risks of structural failure. Transparency is critical to investor confidence, particularly where multiple strategies or jurisdictions are involved.
- Winding-up and contingency planning: Although SP assets are statutorily segregated, insolvency or litigation scenarios should be modelled and addressed contractually. This includes provisions for SP-specific liquidation, inter-SP liabilities and dispute resolution.
Sponsors should also consider the operational infrastructure required to support an SPC platform, including fund administration, loan servicing and compliance monitoring.
Private credit - SPC platform market
As private credit platforms evolve from bespoke execution to institutional scale, the Cayman Islands SPC offers a practical legal infrastructure to support multi-strategy, multi-investor lending. Its flexibility, statutory segregation and adaptability to both on and off-balance sheet deployment make it a compelling option for sponsors building out sophisticated credit franchises.
Careful planning is required to manage operational, legal and investor expectations - but with the right structuring and governance, Cayman Islands SPCs can serve as the foundation of tomorrow’s private credit platforms.
