Reuters: Private Equity: UPDATE 1-Oaktree to invest $225 mln in Diamond Foods

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UPDATE 1-Oaktree to invest $225 mln in Diamond Foods May 23rd 2012, 13:53 Wed May 23, 2012 9:53am EDT May 23 (Reuters) - Investment firm Oaktree Capital Management will invest $225 million in Diamond Foods Inc to help the company shore up its balance sheet, pay down debt and grow its business. The seller of Emerald nuts and Pop Secret popcorn, whose shares rose more than 3 percent, said on Wednesday the investment will allow it to amend its credit agreement with existing lenders and meet its anticipated near-term and long-term funding needs. The investment consists of $225 million of newly-issued debt and warrants to buy 4.4 million shares of Diamond. The debt will mature in 2020 and will bear 12 percent interest per year. The warrants will be exercisable at $10 per share and would constitute ownership of about 16.4 percent of the company. If Diamond secures a specified minimum supply of walnuts from the 2012 crop and meets profitability targets for the nut business for the six months ended Jan. 31, 2013, all the warrants will be canceled and Oaktree may exchange $75 million of the debt for convertible preferred shares. The shares would have an initial conversion price of $20.75, a 3.5 percent discount to the closing price on April 25, the date the commitment was made. Diamond's amended credit facility includes a lower level of debt and substantial covenant relief until Oct. 31, 2013. The transaction is expected to close by the end of May, at which time Oaktree Managing Director Matthew Wilson will join Diamond's board of directors. Dean Hollis, a senior adviser to Oaktree, will also join Diamond's board. Diamond shares rose 71 cents to $23.86 in morning trade on the New York Stock Exchange. Link this Share this Digg this Email Reprints

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