- Access Bank to pay off $200 million bond issued by Diamond on maturity
- Moody’s says Access Bank’s stronger governance and liquidity reduces the risk of default for former Diamond creditors
- The rating firm says Diamond Bank’s poor board and management team threatened its solvency
Moody’s Investors Service says Nigerian lender Access Bank Plc is strong enough to reduced defaults risks for former Diamond Bank Plc creditors after the two merged in March 2019.
The investment service firm stated this in a report released on Wednesday and made available to Business Insider SSAby Pulse.
Peter Mushangwe, Analyst at Moody’s, said, “Access Bank is now responsible for all of Diamond Bank’s liabilities and confirmed it will repay at maturity a $200 million bond originally issued by Diamond.
“Access has stronger liquidity than Diamond, sharply reducing the risk of default.“
Moody’s explained that former Diamond creditors should also benefit from Access Bank’s more stable board and a higher concentration of independent directors, which enhances the quality of its board oversight.
“Access Bank also has better-structured board committees. It will subject management to more thorough scrutiny and makes it more likely that Access will achieve the majority of its merger objectives, including a reduction of its stock of nonperforming loans within the intended timeframe” the report said.
Diamond’s attempt to become a leading Nigerian retail lender led to a build-up of nonperforming loans that ultimately threatened its solvency. Diamond’s liquidity management was also poor, leaving it with insufficient foreign currency balances to cover near-term obligations.
The two banks announced the merger scheme in December 2018, a move that absorbed Diamond Bank Plc’s assets, liabilities and undertakings and transferred to Access Bank.
In the deal, shareholders of Diamond Bank Plc got a cash consideration of N1 per share and two ordinary shares from the merger for every seven ordinary shares of Diamond Bank held effective from March 19, 2019.
The new enlarged banking entity kicked off since Monday, April 1, 2019.