Diamond-backed bond deal hits the road

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Joy Wiltermuth

Diamonds might be a girl’s best friend but a major gem trader is betting that asset-backed bond investors will take a shine to them too.

Antwerp-headquartered Diarough Group is on the road with a US$150m bond deal backed by its inventory of rough and polished diamonds, called SHINY 2017-1, according to deal documents viewed by IFR.

The trade is expected to officially roll out next week and offer four-year and seven-year notes, each roughly US$75m in size and rated Single A by Kroll Bond Ratings Agency.

Diarough previously completed a private securitisation in 2007 that was refinanced in 2012, according to Kroll.

But the company has been looking to build up more support for the new deal and held buyside meetings as far back as February’s annual securitisation conference in Las Vegas.

One potential concern Kroll noted about the deal is the rise of synthetic diamonds over the past decade, particularly since the laboratory variety can cost 30%-40% less than those dug out of the ground.

“While there have been no clear indications that consumers favor synthetic diamonds relative to mined diamonds, social and ethical concerns surrounding mining practices have been raised over the past decade by multiple organisations and individuals,” Kroll wrote in its presale.

Diarough reported about US$900m in revenue in 2016 and is one of the largest diamond traders specialised in rough dealing, diamond polishing and jewelry sales, according to the deal documents.

Tiffany’s and Cartier are among its buyers and the seller is fully compliant with the Kimberly Process, which certifies diamonds as “conflict free,” according to the documents.

Guggenheim Securities is the sole bookrunning manager.

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