Islamic bonds used to buy 007’s wheels

The name is Bond. Islamic bond.

Or rather it should be, considering that the consortium which this week bought Aston Martin – makers of James Bond’s favourite sports car – is going to finance the purchase according to strict Islamic principles.

Ford Motor agreed to sell the company for £479m to a leveraged buy-out consortium organised out of London by Dave Richards, a motor racing entrepreneur.

Now WestLB, the German bank, has been appointed to arrange £225m of quasi-debt finance to back the LBO – but only that which accords with the Koran’s opposition to interest and speculation.

“This will be financed in an exclusively shariah-compliant way,” said David Testa, an executive director at WestLB, who believes that this is the first time that Islamic finance has been used for an LBO in the UK – and probably the western world.

The Islamic financial focus has arisen partly because two key financiers behind the LBO are Investment Dar and Adeem Investment Company, two Kuwaiti groups that only invest in accordance with Islamic principles, like a growing number of Gulf investors.

However, the move comes at a time of rapid growth in the Islamic finance sector, now estimated to have assets of well over $300bn (£155bn) worldwide – a reflection of growing religious sentiment in the Muslim world and high oil prices putting more finance in the hands of groups such as Investment Dar.

At the same time, western investment banks such as WestLB, Deutsche Bank, Citigroup and Barclays are becoming more involved in Islamic finance.

WestLB, for example, expects to syndicate the Aston Martin LBO finance among Islamic banks in the Gulf and London, as well as to non-Islamic groups such as European banks. “This has wide appeal,” Mr Testa said.

The finance package will initially be structured in a manner comparable to a syndicated bank loan, with total debt of about 4.5 times earnings before interest, tax and depreciation – a relatively low level compared with recent European LBOs.

However, the LBO consortium is expected to issue sukuk – or so-called Islamic bonds – in the future to take advantage of planned changes in UK law that will make it more attractive, in tax terms, for UK companies to issue these instruments.

This additional financing is expected partly because the company has ambitious plans.

These ambitions are likely to meet warm approval among Middle East financiers, given the Gulf’s love affair with fast cars. But it remains to be seen whether these financiers will also ban other factors that might be deemed non-Koranic – such as the use of martini-swilling spies to market the iconic brand.

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