Rosy Blue Carat is preparing to issue $81 million asset-backed securities, which will repay investors from diamond inventory and insured diamond receivables. The notes will repay outstanding debt from a 2018 Rosy Blue issuance, among other uses.
Channel Capital Advisors serves as the deal's arranger, cash manager and program manager, according to Kroll Bond Rating Agency. Indusind Bank is the original lender on the underlying loans, and the borrower base is dynamic, KBRA noted. That should to ensure that the rough and polished diamonds provide sufficient collateral to note holders, KBRA said.
One key benefit that drives enhancement to the notes, however, is that a credit insurance policy from AIG Europe covers the Rosy Blue Carat receivables. The issuer is endorsed, directly, as a beneficiary under the insurance policy that provides up to $55 million of receivables insurance.
The structure reserves a first-loss deductible, KBRA said. After that AIG will insure the full face amount of any insured receivable that becomes 180 days past due of where the underlying obligor becomes insolvent, the rating agency said.
There is also a funding base test that adjusts for dilutions and yield coverage, according to KBRA.
Rosy Blue Carat will issue two classes of notes, and KBRA intends to assign ratings of 'A' to both. The $28.7 million A-2 notes are benchmarked to the one-month Secured Overnight Financing Rate, but the benchmark on the A-1 notes was unclear at press time.
Established in Mumbai, India in 1960, Rosy Blue is one of the largest diamond traders worldwide and with an additional office in Antwerp, Belgium. The company holds De Beers Group sightholder status, also known as relationships with miners. This gives Rosy Blue access to long-term contracts and consistent diamond supplies.
One drawback, however, is that Rosy Blue is a family-owned business: the chairman is a member of the founding Mehta family, the third generation of the Bhansali, and second-generation Mehta family members run the company. KBRA believes that this could undercut oversight. Such a long operating history and its critical sightholder status are just a couple of ways that this risk is mitigated, KBRA acknowledged.
