The billionaire brothers who co-own the Asda supermarket chain borrowed tens of millions of euros interest-free from their petrol station empire EG Group to buy two private jets.
Mohsin and Zuber Issa took out €39mn in unsecured loans in 2018 from the business they co-own with the private equity group TDR Capital, corporate filings show.
EG Group lent the money to two Isle of Man companies set up that year through which the brothers personally own the planes — one of which is a model advertised by its manufacturer as being “ideal” for transporting heads of state.
The generous loan terms were flagged as part of the company’s most recent audit, according to two people with knowledge of the matter. As a result, the brothers, who jointly run the company, will be charged backdated interest on the loans.
The Issas, who co-own Asda with TDR, own a Bombardier Global 6000 and a Bombardier Challenger 350. Both are emblazoned with vanity call signs ending in EG, even though the company itself does not own them.
The arrangement offers a glimpse into the way the Issa brothers’ personal and professional interests are intermingled at EG Group, a highly leveraged company that has grown at breakneck speed through a series of acquisitions globally.
The brothers also borrowed from Bank of America to buy the planes, using the interest-free loans from their petrol station company to fund at least some of the remaining cost, the people said. The US lender has security over the jets and charges the brothers interest. In contrast, the loans from EG Group are unsecured, although they do come with a personal guarantee from the brothers.
Blackburn-based EG Group will now decide what interest rate they should be charged, a person with knowledge of the matter said.
A private jet lawyer told the Financial Times that banks do not typically lend against aircraft on an unsecured basis and the interest rate on a loan without any security should be “multiples higher” as a result.
Separately, EG Group has paid the Issas’ Isle of Man companies for use of the jets, corporate filings show. It paid them €2mn in 2019 and €1mn in 2018 for “the provision of commercial transport”, according to EG Group’s accounts.
The brothers started out with one petrol station in the northern town of Bury, near to where they grew up in Blackburn. EG Group also owns Leon, the fast-food chain, and Cooplands, the bakery chain.
The companies through which the brothers own the planes, Clear Sky LP and Clear Sky 2 LP, owed EG Group $21mn as of December last year. The sums owed were “for a short-term loan, repayable on demand”, corporate filings show. The petrol station operator made $54mn in profit after tax that year.
“Loans to the Clear Sky companies are fully disclosed in the EG Group accounts,” said EG Group. “The repayment of these loans are guaranteed by Mohsin Issa and Zuber Issa personally.”
“EG Group occasionally charters aircraft from the Clear Sky companies to facilitate secure travel to international business meetings and to support the effective management of our in-country operations in 10 international markets across Europe, [the] USA and Australia,” EG said, adding that this was done at “standard commercial rates”.
Other travellers can charter the Issas’ jets, which were both manufactured in 2018. Any profits from renting them out go to the brothers rather than EG Group. Both planes have been in regular use since at least December 2020, the earliest data available, according to Flightradar24, although it has no record of flights by the smaller jet since mid-September.
No payments from EG Group to the Clear Sky companies were disclosed in 2020 and 2021 “due to the small sums involved as a result of limited travel due to the Covid-19 pandemic”, said EG Group. TDR declined to comment.
TDR invests on behalf of institutions including public pension funds and endowments. The petrol station operator’s investors also include the Abu Dhabi Investment Authority and two Canadian pension funds, the Alberta Investment Management Corporation and PSP Investments.
In 2020 the trio bought preference shares — considered halfway between debt and traditional equity — from the Jersey holding company through which the brothers and TDR own EG Group.
The Issas have set up complex financial structures to own the jets. Both planes are owned by “limited partnership” entities of which Mohsin and Zuber are the partners. Those entities are managed through the investor services company IQ-EQ.
Mark Lewin, IQ-EQ’s head of private wealth in the Isle of Man, said the structures were “perfectly legit” but declined to comment further.
The interest-free loans were made at a time when the Issas were the only directors of EG Group, although TDR owned a stake and two of the private equity firm’s managing directors, Manjit Dale and Gary Lindsay, were directors of its Jersey parent company.
The company has been seeking to bolster its top ranks since. It appointed Lord Stuart Rose, who previously ran Marks and Spencer, as chair, and Dame Alison Carnwath, former chair of Land Securities, as a non-executive director, in 2021.
EG Group, which previously considered a public listing, has faced scrutiny over its corporate governance. In 2020 Deloitte abruptly resigned as its auditor because of concerns about its internal controls.
“We continue to develop our internal controls and risk management framework”, EG Group’s audit and risk committee said in its 2021 annual report, published last month. “Whilst significant progress has been made to date, the committee is aware there is still more work to be done.”
It is not clear how much the brothers paid for the jets. A Global 6000 would have cost between $55mn and $62mn in 2018, and a Challenger 350 would have cost about $25mn that year, depending on the cabin layout and any additional features, according to the specialist valuations firm VV Aviation.
The Isle of Man, a 33 mile-long island off the coast of north-west England, is a self-governing British crown dependency like Jersey and Guernsey and has become a hub for private jets.