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.