Diamond Inventory Sealed Due to DTC Sightholder's Huge Unpaid Bank Debt

(IDEX Online News) – The entire diamond inventory of a very large Mumbai-headquartered diamond firm was sealed in Antwerp and Mumbai on Wednesday due to unpaid debts to one of the largest banks financing the diamond industry. The debt is estimated at more than $200 million.

The bank has been in negotiations with the diamond firm over the past several months following its demand that the company reduce its debt. The bank turned to a court, which issued an order that allowed seizing the entire inventory when the negotiations failed.

In addition, customers of the company have been told to pay any outstanding invoices directly to the bank.

The firm is a DTC Sightholder with two Sights in London and a Sight in Botswana. It is also a contract buyer with Alrosa, a Term and Spot customer of BHP Billiton and a client of Harry Winston. Its operations include wholesaling rough, polishing and jewelry manufacturing.

The news rocked the Mumbai diamond center and the shockwaves have caused concerns in the market about its ramifications. The size of the company’s debts to other diamond firms is currently unknown.

Concern in the market has been voiced over the bank's long-term intentions and if it intends to decrease its exposure to the diamond industry in general or just to those with high revolving credit and possible problems paying off large debts.

Others are worried that, following the bank's lead, other financial institutions will reconsider their position towards the diamond sector in general and the diamond company in question in particular. The fear is that other banks could also attempt to reduce the company's credit lines, further limiting its ability to operate.

Finally, the diamond industry is worried about a snowball effect that could hurt mid-size and smaller companies.

The company and the bank were not available to comment at press time.