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TERMSHEET Derindere Turizm Otomotiv San Tic INSTRUMENT ISSUER ISSUER PRINCIPAL ACTIVITIES ISSUE SIZE & PRICING Syndicated Murabahah Derindere Turizm Otomotiv San Tic Operational fl eet leasing business. The company is a leading player in the Turkish fl eet leasing industry. US$60 million DATE 11 th January 2007 ISSUANCES BOOKRUNNER ARRANGERS LEGAL COUNSEL FOR ISSUER LEGAL COUNSEL FOR ARRANGERS GUARANTOR TRUSTEE SHARIAH ADVISER METHOD OF ISSUE PURPOSE OF ISSUE RATING ROADSHOWS SUBSCRIPTION INVESTORS NA Citi Citi NA Allen & Overy LLP Pekin & Pekin Ozkan Derindere (personal shareholder guarantee) Security agent: Citibank Turkey Citi Islamic Investment Bank Shariah Advisory Board NA Purchase of various passenger motor vehicles for leasing purposes None None 75% oversubscription Middle East, North Africa and Europe Page 62 www.IslamicFinanceNews.com
Deals of the Year 2007 Handbook Aston Martin Lagonda Acquisition: The UK’s First Islamic LBO Last year, The Investment Dar (TID) of Kuwait led a consortium of investors in the acquisition of the iconic Aston Martin Lagonda Group from Ford Motor Company in the UK in a landmark GBP522 million (US$1.04 billion) transaction. The acquisition was effected through a newly established company, Primrosehaven Limited, subsequently renamed Aston Martin Investments Limited (AMIL). The transaction marks the largest regional acquisition of a major European corporate by an Islamic investment company. PRINCIPAL SPONSORS The equity holders in AMIL comprise TID with a 53.29% stake; ADEEM Investment & Wealth Management (Kuwait, 21%); Stehwaz (Kuwait, 7.5%); Ulrich Bez (UK, 4%); David Richards (UK, 3%); and Sinders Racing (UK, 2%). The Aston Martin transaction is the fi rst of its kind used to fi nance the acquisition of a major asset in the UK, and is the fi rst ever leveraged buyout (LBO) to be entirely backed by Shariah compliant debt in the UK. In other words, the entire transaction was structured Islamically. The fact that Aston Martin is a debt-free company made it easier for investors to Islamicize the fi nancial structure of the company, including future fi nancing needs. FINANCING STRUCTURE The transaction value totaled GBP522 million, of which GBP297 million (US$592 million) was fi nanced through equity contributions from the consortium members, and GBP225 million (US$448.6 million) through a syndicated Islamic senior secured acquisition facility. Ford Motor Company has an ongoing nominal interest in Aston Martin Lagonda Group through a separate class of preferred equity totaling GBP40 million (US$80 million). The GBP225 million facility, a commodity Murabahah, comprised a two-tranche structure: a GBP200 million (US$399 million) term facility and a GBP25 million (US$50 million) revolving facility. Under the master facility, WestLB (mandated lead arranger, underwriter and bookrunner), acting as investment agent, signed a Murabahah agreement with Bidco; and an investment agency agreement with the banks participating in the syndication. The facility has a term of eight years and a profi t rate of six-months LIBOR + 295 basis points rising to six-months LIBOR + 345 basis points if a put option is not exercised. The structure contains a put option at the end of year fi ve, allowing the participating banks to demand repayment of the facilities. Under the agreement, the purchaser is allowed to repay the facilities at the end of every rollover period. CHALLENGES IN STRUCTURING ISLAMIC DEALS UNDER ENGLISH LAW The consortium encountered several challenges during the structuring of this transaction, including satisfying the legal provisions of the “collective investment scheme” and the so-called Whitewash process under English law. The main challenge was how to structure the Murabahah fi nancing in a way that was compatible with English law. Under Islamic investment principles, investors prefer to invest directly in assets through a partnership. However, the consortium along with the Murabahah facility providers could not use TID’s pioneering Islamic fi nance structure — the convertible Musharakah (or partnership) — because it was not cost effi cient due to the various restrictions and complications under the collective investment scheme. The Whitewash, on the other hand, is an English legal process whereby a company (and its subsidiaries) targeted for takeover gives fi nancial assistance to the purchaser, as their assets are used as security against any secondary debt fi nancing facility. Complying with the Whitewash provisions is an exhaustive, time-consuming and complex process. These include passing a board resolution and memorandum; auditor’s statutory reports; shareholders’ resolutions and directors’ declaration. This process has to be completed within eight weeks of the declaration; otherwise, the purchaser has to reapply for the Whitewash. FUTURE IMPLICATIONS The Aston Martin transaction can be converted into a long-term Musharakah (equity participation) structure in due course to effect the expansion of the brand into new export markets such as China, Gulf Cooperation Council countries, India and Russia. It paves the way for further acquisitions and quality assets through the Islamic LBO and other Shariah compliant structures in the UK and the European Union. This case study was written by Investment Dar Company K.S.C.C, Marketing & PR Department. Tel: +965 232 4000; Fax: +965 240 7762 www.IslamicFinanceNews.com Page 63
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