A debt facility backing the carve-out of luxury carmaker Aston Martin has become the first-ever European loan to be backed entirely by Islamic financing. German bank WestLB last month completed syndication of a £225 million ($447 million) senior loan compliant with Sharia, the Islamic code of law.
The all-senior bullet facility includes a £200 million eight-year term loan and a £25 million eight-year revolver. It supports a £522 million deal, reached last year, to buy Aston Martin from Ford Motor Co. by a consortium of investors including incoming chairman David Richards and Kuwaiti firms Investment Dar and Adeem Investment & Wealth Management.
Walid Sarieddine, the head of Islamic finance at WestLB who led the deal, said: “The requirement to have a Sharia-compliant financing solution came from the sponsors, Investment Dar and Adeem Investment, both Sharia-compliant investors.”
Sharia forbids many features common to Western finance, including the payment of interest. Banks in Europe and New York have begun developing workarounds to attract capital from the Middle East. West LB did not say how it structured the Aston Martin debt facility to make it compliant with Islamic law.
Sharia compliance is not ubiquitous for Middle East funds but is becoming more common. With Middle East investors increasingly active as financial sponsors on European deals, there are likely to be more of this type of debt facility.
The deal was syndicated to a mix of European, Middle East and Asian banks. Sharia-compliant financing may access a new pool of syndicated buyers because it targets both traditional and Islamic investors.
Lloyds TSB, Bahrain Islamic Bank, Standard Bank and European Islamic Investment Bank joined as lead arrangers, as did Qatar National Bank and Europe Arab Bank. Kuwait Finance House (Malaysia) Berhad, Bank Mualamat Malaysia Berhad and Banque BIA joined the loan syndicate.
Other credit arrangers are likely to pay particular heed to the breadth of the bank group as buyers for leveraged loans continue to dwindle. Still, it remains unclear whether the large bank group was attracted to the deal because of the quality of the target company or because of the sponsors involved.
Last March, Ford agreed to sell its Aston Martin business to a consortium comprising Richards, John Sinders, Investment Dar and Adeem Investment Co. Richards is founding chairman of Prodrive, which runs the Aston Martin racing team. Sinders is an Aston Martin collector and a backer of Aston Martin Racing. Ford retained a £40 million stake in Aston Martin.
Aston Martin had been on the block since August 2006, the result of a restructuring at Ford geared to generate returns for stockholders.—IFR Buyouts, a sister publication of Thomson Financial.