– Nigeria’s Access Bank has taken on Diamond Bank’s liabilities and will repay Diamond’s $200 million bond on maturity
– Access Bank’s stronger governance and liquidity reduces the risk of default for former Diamond creditors after the merger of the banks
London -WED, MAY 08 2019-theG&BJournal-Nigerian lender Access Bank Plc has reduced default risks for former Diamond Bank Plc creditors thanks to stronger governance and liquidity after the two merged in March, Moody’s Investors Service says in a report published today.
“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,” said Peter Mushangwe, Analyst at Moody’s. “Access has stronger liquidity than Diamond, sharply reducing the risk of default.”
Former Diamond creditors should also benefit from Access Bank’s more stable board and 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.
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.
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