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Diamond Foods (DMND) Announces $225M Investment From Oaktree Capital

 May 23, 2012 11:32 AM
 


(By Balachander) Diamond Foods Inc. (NASDAQ:DMND) announced that private-equity firm Oaktree Capital will invest $225 million to help the snack-food company strengthen its balance sheet and reduce debt.

The investment should come as a relief to the seller of Emerald nuts and Pop Secret popcorn after being hit by an accounting scandal over payments to walnut growers.

The internal enquiry over the scandal caused the ouster of the company's chief executive and chief financial officer and also resulted in the collapse of Diamond's deal to acquire Pringles potato chip unit from Procter & Gamble (NYSE: PG).

[Related -United States Steel Corporation (X): Small Insider Buy, Big Rewards?]

Diamond said on Wednesday it has received interest from "a number of top-tier investment firms" before reaching an agreement with Oaktree.

The investment of new capital by Oaktree will provide Diamond with sufficient liquidity to meet its anticipated near-term and long-term funding needs.

The Oaktree investment initially consists of $225 million of newly-issued senior notes and warrants to purchase around 4.4 million shares of Diamond stock.

The senior notes will mature in 2020 and will bear interest at 12 percent per year that may be paid-in-kind at Diamond's option for the first two years. Oaktree's warrants will be exercisable at $10 per share, and would constitute a fully diluted ownership level of about 16.4 percent of DMND.

[Related -Procter & Gamble (PG) Dividend Stock Analysis]

On February 8, Diamond Foods announced that its audit committee found faults with regard to payments to walnut growers in 2010 and 2011 and that it will be restating its results for these two years.

The stock, which has been trading in the range of $20.01 to $96.13 over the past year, fell 0.78 percent to trade at $22.97 on Wednesday.

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