De Beers Says Other Lenders Can Benefit From Diamond Bank Demise

By Thomas Biesheuvel Photographer: Chris Ratcliffe/Bloomberg

An uncut diamond is selected from a collection of colorless and colored diamonds on a... Read More

De Beers said plans to wind down Antwerp Diamond Bank will create opportunities for other lenders in the $15 billion gem-finance market.
Antwerp Diamond Bank, or ADB, will stop lending to companies that trade, cut and polish the stones after a sale by KBC Groep NV to China’s Yinren Group collapsed last week. The bank accounted for more than 10 percent of industry lending.
“KBC’s decision will create funding opportunities for other lenders,” De Beers, the world’s biggest diamond producer, said in a statement. “Particularly in those midstream accounts that can demonstrate excellent corporate governance, transparency and financial strength.”
About one-third of the diamond merchants in the Belgian port city, where 80 percent of the world’s gems are bought and sold, are financed by the ADB, according to the Antwerp World Diamond Center. The group representing gem traders said it’s talking to
market participants about ways to replace the lost lending as the institution’s demise threatens Antwerp’s pre-eminent position in the global diamond industry.
KBC, Belgium’s largest lender by market value, was forced to sell ADB as part of conditions imposed by the European Commission for receiving state aid in 2008 and 2009. After years of struggling to find a buyer, the Brussels-based bank announced last December an agreement to sell it to Yinren, a Chinese group that trades diamonds.

Sad Day

That deal fell through last week after Yinren failed to submit a comprehensive file to the Belgian regulator. What remains of ADB will be folded into KBC as its loan book is run down, the bank said last week.
“It’s a sad day for our industry,” De Beers said, “ADB has been a mainstay of industry financing since the mid-1930s, and in our view it is unfortunate that KBC’s issues are causing them to walk away from some highly bankable diamond assets.”
The bank was founded in 1934 in Antwerp’s Diamantkwartier, the district that’s been the center of the global trade since the mid-19th century. After shipping all its stones to the U.S. as the German army advanced in 1940, the bank helped revive the city’s diamond industry after World War II.
De Beers is overhauling the way it sells its diamonds as it seeks to direct more gems to its most successful customers, known as sightholders. Requirements to buy from the Anglo American Plc unit will include maximum debt-to-equity ratios and an audit of their books.
“These measures will further reinforce the confidence of banks that provide working capital funding to sightholders,” De Beers said.