Islamic financing to leverage sale of Aston Martin


“They (the Kuwaiti investors) seem to think that the deal is done. Well, it isn’t. We are not making as much progress on the deal as we would like, because the bidding consortium seems to have gone on holiday,” said a source close to the parties.

The financing package for the sale will be a groundbreaking Islamic financing facility, which will be the first of its kind to finance the acquisition of a major asset in the UK.

TID is one of the fastest growing Islamic financial institutions (IFIs) in the GCC and focusing on real estate and consumer finance business. At end December 2006, TID had an average market capitalization of $ 3.35 billion. At end of June 2006, TID had total assets of $ 2.938 billion and shareholders’ equity of $ 880 million. It currently enjoys an issuer rating of A- from ICRA, the Asian affiliate of Moody’s; and a long-term rating of BBB assigned by Cyprus-based Capital Intelligence, which specializes in emerging market ratings.

Last year, TID mandated the London branch of WestLB and Unicorn Investment Bank of Bahrain, to lead arrange a $ 150 million Sukuk, the proceeds which were being used for general corporate purposes. WestLB has also been mandated to arrange the Aston Martin 225 million pounds financing facility on a sole basis, which is most likely to be syndicated to the market in the next few weeks.

The TID/Al-Deem-led consortium is buying Aston Martin from Ford on a leverage basis. To what extent Aston Martin as a company is leveraged, is not clear. It will have a bearing on the type of structure used to finance the acquisition, which is essentially a private equity deal. The level of conventional interest-based debt on its books could affect the deal if it is done on a Shariah-compliant basis.

But this would also depend on the underlying Islamic contract/s used to structure the transaction. The use of a Sukuk structure has been apparently ruled out for the primary syndicated financing facility, although the door to securitize assets of the company down the line has been left open.

The groundbreaking part of this deal is that the consortium is going into this deal on a Shariah-compliant basis from start to finish. There will be no “leakage” in that there will be no involvement of conventional secondary or mezzanine financing facilities.

Aston Martin is of course the glamorous mode of transport preferred by celluloid British secret agent, James Bond, codenamed 007, and millions of young men around the world. There are also reports that one or two TID and Al-Deem senior executives are members of the Aston Martin Owners Club.

The latest facts are that the sale of Aston Martin has been agreed and accepted by Ford worth about 479 million pounds; that Aston Martin will remain a UK company and manufacturing out of the UK; and that the financing package for the sale will be a ground-breaking Islamic financing facility, which will be the first of its kind to finance the acquisition of a major asset in the UK.

Islamic legal scholars have over the years come under fire for allowing deals especially in corporate finance or real estate transactions where the primary deal is Shariah-compliant but any additional financing facilities could be conventional. Lawyers specializing in structuring Islamic financing transactions at the City law firms agree that in a jurisdiction such as England, there is no excuse because the English tax and legal environment “is in your favor” and the whole transactions can now easily be done Islamically, including any secondary financing requirements.

The “cleaning up” of Islamic financing facilities such as the commodity Murabaha gained momentum at the recent Global Islamic Finance Forum held in Kuala Lumpur in March 2007.

In fact, Dr. Zeti Akhtar Aziz, governor of Bank Negara Malaysia (the central bank) in Kuala Lumpur during the forum announced that Bank Negara, together with the Securities Commission and Bursa Malaysia and industry players, have established the Commodity Murabaha House, which will act as a liquidity management scheme for Islamic bank overnight and short-term deposits, based on using crude palm oil as the underlying commodity trade for investment. Bank Negara has executed CMP (Commodity Murabaha Program) master agreements with eight Islamic banking institutions to promote the use of the instrument for liquidity management.

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