West LB has syndicated the largest Islamic finance leveraged buyout in the UK, selling the £225 million ($441.3 million; €301.4 million) debt of luxury car brand Aston Martin, according to Harvey Hoogakker from the German bank’s leveraged finance team.
The debt backing the £522 million buyout by two Kuwaiti firms Adeem Investment and Investment Dar was bought by investors from both the Gulf Co-operation Council and the UK familiar with Islamic finance, he said.
The debt is 4.2 times to the business’ 2006 EBITDA as part of motoring business Ford, although Hoogakker said the multiple would be higher on a pro forma basis reflecting the business functioning as a standalone entity.
The hybrid deal had been difficult to structure, as the UK tax law raises complexities for Islamic finance. “The underlying asset is a UK-based asset and not all techniques in the GCC sit well with legislation in the UK,” Hoogakker said.
The debt has been sold over an eight year period, with “a put option” after five years to entice holders tentative about investing in an innovative Islamic structure.
Hoogakker said the deal was not unduly impacted by the problems in the credit markets due to the greater liquidity of Islamic investors seeking to invest in Shariah compliant deals. Having closed the transaction in May the company’s syndication timetable had instead been slowed down by resolving loose ends, the lack of investors during the summer break and Ramadan directly afterwards.
Aston Martin consumers are insensitive to the economic cycle as they are often high net worth individuals, Hoogakker said. Although those earning their incomes from stock market performance or bonuses may be affected, he said.
There have been few other Islamic Finance deals in the UK. HSBC Amanah financed the buyout of $31 million (€21 million) buyout of Amtech Power Software in 2006 in what is believed to be the first such leveraged buyout in the UK.