Gems Education, the biggest school operator in Dubai, obtained a Dh2 billion loan to refinance investments and provide funds for expansion in the Middle East and North Africa.
The six-year facility with Islamic and conventional parts was arranged by Abu Dhabi Islamic Bank, Mashreqbank, Dubai Islamic Bank, and Noor Islamic Bank, the privately owned company said. United Arab Bank participated in the facility.
Gems Education's fundraising comes as a rebound in Middle East economic growth prompts companies to return to the debt market after the global financial crisis cut access. Companies in the Middle East and North Africa have raised US$26 billion via syndicated loans and bonds so far this year compared with $18bn in the same period in 2011, according to data compiled by Bloomberg.
"Recently we announced our intention to build 10 new schools in the UAE over the next two years to meet growing demand," Gems Education's chief operating officer Dino Varkey said in the statement. "This new bank facility supports this expansion plan."
Gems Education has seized upon growing demand for private education since 1980, when Dino's father and current Gems chairman, Sunny Varkey, took over the business his parents established in 1959 and started opening new schools. At the time, Gems operated one school with 300 students.
Now it employs 11,000 people and offers a variety of curricula – including American, British, Indian and International Baccalaureate – charging fees ranging from $750 a year to $40,000 a year to serve different income segments. Gems Education makes about $500 million in revenue a year, Mr Varkey said last month.
* Bloomberg News
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3. Ensure healthy lives and promote well-being for all at all ages
4. Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
5. Achieve gender equality and empower all women and girls
6. Ensure availability and sustainable management of water and sanitation for all
7. Ensure access to affordable, reliable, sustainable and modern energy for all
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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