LONDON, 9 July 2007 -- The new owners of British luxury car manufacturer, Aston Martin Car Company, makers of James Bond's favorite car, plan to leverage the company by selling down parts of the company through a long-term Musharaka (equity partnership) structure to investors, primarily in the Gulf Cooperation Council (GCC) states.

David Testa, executive director and head of Islamic finance at the London branch of WestLB, the bank which structured the 479 million pounds sale of the iconic Aston Martin by the famous US car manufacturer, Ford, to a consortium led by two Kuwaiti Islamic financial institutions, The Investment Dar Company (TID) and Adeem Investments, confirmed in London recently that the Musharaka offering "is work-in-progress."

A possible structure would be for Aston Martin Lagonda (AML), the manager of the Musharaka, to identify an asset pool to contribute to the Musharaka. These could be buildings, technology such as a robot used in the manufacturing, said to cost 25 million pounds alone, land etc. A purchase price for any interest in the asset pool would then be agreed. AML and the investment agent (IA) would co-own the assets. The balance of cash would go to the Musharaka which would apply to the co-owned assets, which in turn would then be transferred to the Musharaka. The IA would then lease its interest in its proportion of the co-owned assets back to AML, which will also give a purchase undertaking in the vent of a default.

The Aston Martin deal was closed at end June 2007. The 479 million pounds transaction was financed through 60 percent equity contributions, and through a 225 million pounds Murabaha financing facility, a quasi-debt which was lead arranged by WestLB. The Investment Dar (TID) has a 50 percent equity stake; followed by 27.78 percent by Adeem Investments; 15 percent by Ford Motor Company; and minority stakes by David Richards and John Saunders. WestLB was the mandated lead arranger (MLA), the underwriter and bookrunner of the deal. The financing transaction involved a Murabaha (cost-plus financing) agreement between Bidco (a commodity broker) and WestLB; and a Mudaraba agreement between WestLB and the syndicate banks.

The transaction involved Bahrain Islamic Bank, European Islamic Investment Bank (EIIB) and the London branch of South Africa's Standard Bank as joint lead managers.

According to WestLB, the financing facility had two tranches -- a 200 million pounds term facility and a 25 million pounds revolving facility. The facility has an 8-year final maturity with a 5-year put option. The pricing of the facility has a profit rate of 3 or 6 months LIBOR plus 295 basis points. The financing, an LBO, stressed David Testa of WestLB, is the first involving Islamic finance in the UK, if not the Western world. The entire transaction from start to finish, according to Testa was Shariah-compliant.

The additional financing is needed partly because the company has ambitious expansion plans. "The good news," explained Adnan Al-Musallam, chairman and managing director of TID to Arab News, "is that Aston Martin is a debt-free company. This makes our life easier. This is a strong point in order to finance the company in the future."

Asked why an Islamic financial institution is buying a luxury sports car company, Al-Musallam defended the acquisition on "purely business reasons. We are looking for an investment opportunity and how attractive it is. We are an Islamic finance and investment company; we look at the debt of the company. We do our due diligence. Aston martin is a debt free company. We look at Islamizing the company, from our activities point of view. As an Islamic financial institution, we do our deals only on an Islamic basis."

At the same time, he stressed that Aston martin is a "top of the line company". The current management, he added, has done an excellent job -- the company use to sell 800 car units in 2000. Last year this figure surpassed over 7,000 units.

The expansion plans include news markets in China, India, Russia and the GCC countries. This in addition to traditional markets in the US, UK and EU. The eventual plan is for China to account for 25 percent of sales alone. The company is expected to launch new models such as the Rapide later this year in Southeast Asia and the GCC.

The consortium stress that they are private equity investors and would leave the day-to-day management of the company to the senior executives. "In all our acquisitions in the past, we come to help and boost the management. We do not interfere in the day-to-day business," assured Al-Musallam.

There has been recent talk of Aston Martin closing production at one of its two centers in the UK and expanding the remaining one to create more jobs to meet the demand for expansion into the new markets.

The Aston Martin deal has taken the London and European banking sector by storm. It could pave the way for more such Islamic private equity acquisitions of famous UK and EU brands, on the provision that the financing facilities are completely Shariah-compliant.

By Mushtak Parker

© Arab News 2007