Concentration is not a linear risk, and that is the first thing to hold onto. A customer moving from 31% to 58% of revenue has not "roughly doubled" the exposure — it has changed what the business is. Below a third, losing the customer is a bad year. Above half, losing the customer is a solvency event, which means the customer now holds something close to a veto over the borrower's existence, and both parties' procurement teams know it. Read the margin line with that in mind: 90 basis points given up on renewal is not a pricing detail. It is the customer already exercising the power the concentration gives it, politely, on schedule, every negotiation from now on.
But name the actual risk precisely, because it is not the customer's credit. The chain is investment-grade; it will pay its invoices. The risk is the asymmetry of commitment: Meridian is being asked to hold five-year assets against a relationship the other side can leave in ninety days. Eighteen linehaul units and a dedicated distribution centre are not the same kind of asset. Tractor units are generic — if the contract dies, they haul for someone else at a discount. Racking, automation, and fit-out configured to one customer's network are worth something close to scrap the day the notice letter arrives. The NZ$6.0m request bundles both kinds as if commitment were symmetrical. It is not, and the fleet-age line adds a quiet tell: at 6.8 years, part of this "growth capex" is really deferred replacement wearing the new contract's jersey.
The reader's favourite answer is C — approve half, and covenant the borrower to diversify below 45% within two years. It sounds like risk management. It is fiction, twice over. A diversification covenant orders a mid-size logistics operator to conjure NZ$15m of new revenue from customers who do not currently exist — you cannot covenant demand into being, and when the covenant is inevitably breached the bank will waive it, teaching the borrower that covenants are decoration. And funding half the capex is worse than funding none: the contract's service levels require the full capacity, so the half-loan finances a breach of the very contract the repayment depends on. D at least has the courage of its convictions — but declining concentration outright, in a sector whose mid-market is structurally concentrated, is a decision to exit NZ logistics, which is a portfolio call, not a file call.
The senior banker's read is B: lend to the shape of the commitment, not the shape of the request. The generic assets — funded fully, five-year amortisation, standard security. The dedicated fit-out — funded conservatively and amortised inside thirty-six months, so the exposed tail of the loan never outlives the notice period's practical runway. Quarterly reporting on contract margin, not just revenue, because the margin line is where the customer's power will show first. And one honest conversation with the MD: the 90-day clause means the bank is underwriting Meridian's operational indispensability — the cost of replacing them — rather than the paper. The structure doesn't remove the concentration. Nothing removes the concentration. It makes sure that if the asymmetry is ever exercised, it wounds the borrower instead of killing it — and that the bank financed a survivable bet rather than co-signing an existential one.