May 12 (Bloomberg) -- Investment Dar Co., the owner of half of Aston Martin Lagonda Ltd., missed a payment on $100 million of debt, becoming the first Persian Gulf company to default on Islamic bonds.

Investment Dar failed to pay a “periodic distribution” due on April 27 to holders of its Islamic bonds maturing in 2010, it said in a statement today. The Kuwait-based company had 1.08 billion dinars ($3.73 billion) of total debt outstanding as of September 2008, according to Bloomberg data.

The market for bonds that avoid paying interest to comply with Islam ballooned from almost nothing in 2002 to $90 billion as surging energy prices spurred borrowing in the Persian Gulf and Asia. Prices for the debt have tumbled since as investors avoided complex securities amid the global credit crunch and the slump in oil slowed the Gulf’s economic growth.

The default will have a “wider implication” as investors will be watching to see if the restructuring sets a precedent for Islamic investments, said Nish Popat, head of fixed income at ING Investment Management in Dubai.

The bonds, also known as sukuk, skirt Islam’s ban on interest by allowing investors to profit from the exchange of assets, such as land sales or rentals, rather than money.

Investment Dar is the first company from the Persian Gulf to default on an Islamic bond, said Khalid Howladar, a Dubai- based senior credit officer at Moody’s Investors Service.

Higher Yields

Sukuk sales dropped 56 percent in 2008 from a record $30.8 billion the previous year, according to data compiled by Bloomberg. A plunge in prices caused the average yield on Islamic securities sold in the Gulf to widen to 7.63 percentage points over the London interbank offered rate, from 3.55 percentage points on Sept. 15, when Lehman Brothers Holdings Inc.’s bankruptcy shattered confidence in credit markets, according to HSBC Holdings Plc.

The spread is higher than the 5.57 percentage points for conventional bonds from the region, the HSBC data show.

Investment Dar, which has more than 50 subsidiaries and associates, said in March it may sell “non-core assets” to focus on parts of its banking, real-estate and luxury-goods holdings and announced last month it is developing a restructuring plan with Credit Suisse Group AG.

Aston Martin, based in Gaydon, England, makes luxury cars including the DBS, which features in the James Bond spy film “Quantum of Solace.” The car has a 6-liter, V-12 engine that develops 510 horsepower.

Kuwaiti Bank Losses

Founded as Bamford and Martin Ltd. in 1913, Aston Martin was renamed a year later after success in a competition called the Aston Hill Climb, according to the carmaker’s Web site. The company was owned by Ford Motor Co. for two decades before being sold to bidders including Investment Dar in a deal valuing it at 479 million pounds ($674 million) in May 2007.

Kuwaiti banks, including Global Investment House KSCC, Kuwait’s biggest investment bank, and Gulf Bank KSC, the country’s second-largest bank by assets, have been among the worst hit in the region by the financial crisis. Global Investment in January said it defaulted on most of its loan repayments, while Gulf Bank last year announced losses of 375 million dinars from derivatives trading.

Kuwait’s Petrochemicals Industries Co. abandoned a basic- plastics joint venture with Midland, Michigan-based Dow Chemical Co. last year after opposition lawmakers pressured the government to scrap the deal, which they said was overvalued amid falling oil prices. Dow and Kuwait are in talks to revive the venture, Dow Chief Executive Officer Andrew Liveris said March 11.

Nakheel Bonds

“Investment firms in Kuwait have been affected the most by the credit crisis,” Popat said. “The market has already priced in this default probability.”

Nakheel PJSC, the Dubai-owned developer building palm tree- shaped islands off the emirate’s coast, may restructure its $3.5 billion of Islamic bonds due in December, Standard & Poor’s said on April 30, citing its discussions with the company’s owner Dubai World.

Some sukuk issuers are returning to the market amid signs that the credit freeze is easing. Indonesia raised $650 million from its first-ever international sale of Islamic dollar bonds last month and Bahrain plans to sell $500 million of five-year bonds compliant with Islamic law starting May 27, central bank spokeswoman Nayla Ali Al Khalifa said last month.

To contact the reporter on this story: Haris Anwar in Dubai on Hanwar2@bloomberg.net

Last Updated: May 12, 2009 12:15 EDT