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IFC Deploys $70 Million Capital to Diamond Bank

By on August 9, 2012

Group Managing Director, Diamond Bank Plc, Alex Otti (left), and Country Manager, International Finance Corporation (IFC), Solomon Adegbie Quaynor, at the signing of MoU of $70 million convertible subordinated loan between IFC and Diamond Bank in Lagos on Wednesday.

The Washington D.C. based International Finance Corporation (IFC) has made US$70 million available to Diamond Bank at a rate just over 6%.

The funds is an investment by IFC and takes the form of a convertible subordinated debenture with a tenor of 7 years.

The loan which is convertible to equity from 2015 was made by IFC (responsible for $50 million), and ACF (responsible for $20 million).

African Capitalization Fund (ACF) is a subsidiary of IFC set up to assist African banks in raising capital.

The funds will assist Diamond Bank in shoring up its Tier 2 Capital, as well as provide a source of funding for its customers credit needs and the banks own expansion.

CEO of Diamond Bank, Dr. Alex Otti said, “This is another stamp of authority on the bank and its management as the IFC truly believes in the growth potential of the bank to seek to become a core shareholder in it. This speaks to the existence of excellent corporate governance culture in Diamond Bank.

“The fundamentals of the bank and its future competitiveness and profitability are sufficiently strong to warrant an international prudent investor like IFC to make such investment,” pointing out that “this is the first subordinated Tier 2 instrument in the Nigerian banking space.”

He explained the nature of the financial instrument and where it ranked in terms of the bank’s obligation to its shareholders and other creditors.

He said, “They [convertible subordinated debts] stand in contrast to senior debt, which are secured against the assets of the borrower and repaid first in the hierarchy of obligations of the borrower. Consequently, lenders are generally more willing to issue senior debt than subordinated facilities.”

Also speaking at the signing ceremony yesterday,IFC Country Director, Mr. Solomon Adegbie-Quaynor said the multilateral institution had confidence in Diamond.

His words: “It is not only IFC that is providing this funding, there is also the IFC private equity arm which is called the Asset Management Company.

“And wherever that Asset Management Company goes in, they are looking at what they see as the growth potential. They are different from the IFC.

“We focus on development, while they focus on growth and for them to have the confidence to invest $20 million, it also demonstrates that they have seen the prospect behind this management team.”