Companies and Brands

Headlines Bad For Diamond Foods, But.... Light at the End of the Tunnel? (DMND)

Diamond Foods, Inc. (NASDAQ: DMND) is adding insult to injury this morning.  The company was never known for its great dividend, but the company is suspending its dividend in an order to conserve capital.  Now there may be an effort to even raise capital after its accounting SNAFU and management firing (and one manager suicide) from its accounting issues over payments made to walnut growers.  There is the ongoing Department of Justice situation, but new management has since come in after the firing of its heads.

The current report is that the firm may sell a minority stake to raise capital.  Whether that is common stock or preferred stock is not yet known but the troubled company has hired Dean Bradley Osborne Partners in an effort to explore capital alternatives to strengthen its balance sheet.

After tapping its credit line to pay debt, the company announced that it would pay its lenders a 25 basis point forbearance fee and that access to the revolving credit facility would increase as well.

Cutting even a 0.7% dividend yield is no good thing.  Unfortunately, when companies run into issues with creditors they are often obligated by credit pacts to cease paying dividends.  That appears to be the case today.

The news is bad on the surface, but maybe it is good news in the end.  Imagine if a private equity player actually saw real value here.  With a crimp on its spending, perhaps that would finally start to mark a bottom.  Just remember that a bottom in a situation like this company has faced rarely comes all at once in a rapid instant.

Diamond Foods shares are down 6% at $24.09 against a 52-week trading range of $21.41 to $96.13.

JON C. OGG

Want to Retire Early? Start Here (Sponsor)

Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?

Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.

Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.