RAKIA Sukuk (continued...) - Islamic Finance News

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
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