Embattled US snack food group Diamond Foods has sold a 16.4% stake in the company to global investment firm Oaktree Capital management.

The investment of US$225m, Diamond said today (23 May), will result in a capital restructure that supports its long-term strategy as well as the execution of its business plan.

Diamond said the recapitalization will allow it to further strengthen its leadership position in the walnut industry, continue the growth of its snack business and reduce the amount of existing bank debt.

The transactions are expected to close by the end of May and, concurrent with the closing of the investment, Diamond will amend its credit agreement with its existing lenders.

“Oaktree has an exceptional track record of supporting the growth of leading companies in the consumer sector,” said Brian Driscoll, Diamond Foods’ president and CEO. “Their expertise and resources will be invaluable as we solidify our market position in the walnut industry and seek to continue to grow our snack brands.”

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“In connection with Diamond’s thorough review of capital alternatives, the company received interest from a number of top tier investment firms,” Driscoll added. “We are very pleased with our decision to partner with Oaktree, an experienced investor with an outstanding reputation. Looking forward, our balance sheet strength will provide a solid foundation from which to build as we position Diamond for the opportunities ahead that can deliver value to our shareholders, our growers and our customers.”

Diamond Foods has endured a tumultuous eight months that have included an accounting scandal that led to the exit of its CEO and CFO and to the derailment of its plan to buy snacks brand Pringles.

The capital investment by Oaktree, in conjunction with the amended bank credit facility, will provide Diamond with sufficient liquidity to meet its anticipated near-term and long-term funding needs, it said.

It will initially comprise $225m of newly-issued senior notes and warrants to purchase around 4.4m shares of Diamond common stock. The senior notes will mature in 2020 and will bear interest at 12% 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 around 16.4% of the company.

Upon the closing of the transaction, Matthew Wilson, a managing director of Oaktree, and Dean Hollis, a senior advisor to Oaktree and former president and COO of ConAgra Foods will join Diamond’s board of directors.