How Orphan Issuer Vehicles Are Being Used In Private Credit Transactions In The Middle East

The private credit landscape across the Middle East is maturing at pace, with sponsors, institutional investors, and arrangers increasingly demanding sophisticated structuring solutions to facilitate bespoke transactions.

Among the most critical components of this toolkit are orphan issuer vehicles - legally independent special purpose vehicles (SPVs) that serve as bankruptcy-remote platforms for private credit, structured finance, private placement and capital markets deals.

Walkers' expertise in the private credit space was recently recognised at the 2025 Global Banking and Markets Middle East Awards, where the firm advised on the Private Credit Deal of the Year. Central to this success is Walkers' deep understanding of orphan issuer structures commonly used in private credit transactions, particularly those involving the Cayman Islands, Dubai International Financial Centre ('DIFC'), and Abu Dhabi Global Market ('ADGM').

The firm is also at the forefront of the growing trend toward credit-linked notes ('CLNs'). Walkers offers clients on the ground market leading and seamless legal and fiduciary support from its Dubai office, managing client needs in the local time zones.

The rise of private credit and structured solutions in the Middle East

Private credit has become one of the most dynamic asset classes in the Middle East, with regional sovereign wealth funds, pension funds, insurance companies, and family offices increasingly allocating capital to non-bank lending platforms and structured risk transfer products. This growth has been driven by a search for yield, portfolio diversification, and the need for alternative capital sources beyond conventional bank lending.

Outside of traditional direct lending, the region is seeing significant growth in synthetic and structured risk transfer, including the use of CLNs.

CLNs are structured instruments allowing originators (typically banks or lending platforms) to transfer credit risk from a defined portfolio to investors, often institutional. A properly structured orphan issuer serves as a neutral vehicle that issues the notes, holds the underlying risk transfer documentation, and ensures the transaction remains bankruptcy-remote and off-balance sheet.

Key features and benefits of orphan issuer vehicles

An orphan issuer is designed to be legally independent from the sponsor, with its shares typically held under a charitable or purpose trust, by an independent share trustee. This creates several material benefits:

• Bankruptcy remoteness - protecting investors from sponsor credit risk.
• Off-balance sheet treatment - critical for regulatory capital or accounting purposes.
• Tax neutrality - particularly when structured through the Cayman Islands.
• Adaptability for shariah-compliant structuring - including Sukuk or hybrid issuances where applicable.

Walkers' integrated legal and fiduciary platform allows clients to deploy orphan issuer vehicles tailored to the specific needs of their private credit transactions, ensuring that legal, regulatory, tax, and investor requirements are satisfied across multiple jurisdictions.

Jurisdictional considerations: Cayman, DIFC and ADGM

Walkers' Middle East office supports the establishment of orphan issuers across the three key jurisdictions most relevant for Middle Eastern deals:

Cayman Islands

• The global market leader for structured finance vehicles, known for its tax neutrality, creditor-friendly regime, and international acceptance among rating agencies and institutional investors.
• Frequently used for large cross-border transactions, including CLNs, asset-backed securities, and synthetic risk transfer.
• Cayman segregated portfolio companies are widely used to house multiple segregated portfolios within a single legal entity, offering structural efficiencies for multi-series note issuances and a segregation of assets and liabilities / ring fencing of investor exposure to the designated portfolio only.
• Walkers' Middle East office provides Cayman legal advice as well as corporate services provider ('CSP'), governance, and fiduciary services for Cayman, ADGM and DIFC entities.

DIFC

• UAE Financial Freezone jurisdiction with an English common law framework.
• Offers a streamlined SPV regime, particularly attractive for transactions with a strong regional nexus or local regulatory alignment.
• Familiarity among Middle East regulators, banks, and institutional investors makes DIFC SPVs a preferred choice for certain private credit and structured deals.
• Walkers' Middle East office delivers CSP, governance, and fiduciary services for DIFC entities.

ADGM

• UAE Financial Freezone jurisdiction with an English common law system, offering robust structuring options for cross-border private credit, securitisation, and asset management transactions.
• Flexible SPV licensing and increasingly prominent role in regional structured finance markets.
• Walkers' Middle East office provides CSP, and governance support for ADGM vehicles.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.