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InvoCare (ASX: IVC) is set to raise $150 million to strengthen its balance sheet as social distancing measures impact its memorial services business.
The net proceeds of the raise will be used to reduce net debt and increase liquidity to support the business during the Covid-19 financial crisis.
The placement will be conducted at $10.40 per new share; a 7.8 per cent discount to the last closing price.
Approximately 14.4 million new shares will be issued, representing around 12.3 per cent of InvoCare's existing issued capital.
Following the placement, total cash on hand plus undrawn bank facilities will increase to approximately $258 million.
In addition to paying off debt, which at 31 December 2019 stands at $360 million of drawn down facilities, InvoCare says it will be deploying cash to fund pre-identified acquisitions and a "digital transformation".
The latter is certainly a necessity for the company, which has witnessed a deferral of consumer spend on memorial services and a 2.2 per cent decrease in funeral cases.
As social distancing measures clamp down on the maximum number of attendees at funerals those mourning the loss of loved ones are spending less on memorial services.
According to the funeral operator the group is turning to tech and has built new measures into the business like video steaming.
InvoCare has also been postponing memorial services to reduce the impact of Covid-19 on its case averages.
To further save cash InvoCare will be deferring the payment of a FY19 dividend until the impact and duration of Covid-19 is better understood.
"Our ability to offer a full range of services to our client families is being affected by the current restrictions issued by governments on social distancing in response to the Covid-19 outbreak," says InvoCare CEO Martin Earp.
"We have implemented a series of contingency plans to both reduce the impact of Covid-19 on our business and allow us to continue to meet the needs of our client families during this unprecedented crisis."
"The decisive actions we are taking today will assist the company in being well placed to weather the current market uncertainties from a position of strength."
Following the $150 million placement InvoCare will offer eligible shareholders in Australia and New Zealand to participate in a non-underwritten share purchase plan (SPP) capped at $30,000 per shareholder and up to $50 million in aggregate.
Further details regarding this non-underwritten SPP will be provided to eligible shareholders in due course.
Updated at 11:49am AEST on 14 April 2020.
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