Diamond Foods CFO faces covenant breach

THE NEW chief financial officer of Diamond Foods is expected to announce that the company is likely to breach its debt covenants and cancel its biggest-ever deal.

Michael Murphy of consulting firm Alix Partners stepped in to replace CFO Steven Neil after the CFO and chief executive Michael Mendes were axed as a result of an accounting blunder.

“Diamond’s restatements will cause debt covenant default and ultimately raise interest expense,” Janney Capital Markets analyst Mitchell Pinheiro said in a note, adding that Diamond’s proposed purchase of Pringles potato chips from Procter & Gamble Co was “finished,” Reuters reporyed.

Diamond Foods said on February 8 that its audit committee concluded that its financial statements for 2010 and 2011 will need to be restated.
The restatements come as a result of an investigation of the company’s accounting for certain crop payments to walnut growers.

The committee concluded that a “continuity” payment made to growers in August 2010 of approximately $20m and a “momentum” payment made to growers in September 2011 of approximately $60m were not accounted for in the correct periods.