oOh!media looks to raise $167m to pay down debt of $354.5m during the coronavirus pandemic

Outdoor advertising company oOh!media’s management looking to slash costs and capital expenditure.

Brendon Cook, chief executive, oOh! Media

oOh!media is looking to raise $167m to pay down its debt pile of $354.5m and has amended its debt arrangements to give the outdoor advertising company "extra headroom" during the coronavirus pandemic, as management look to slash costs and capital expenditure.

Given the major challenges ahead, chief executive Brendon Cook has agreed to stay on until the end of the year, less than two months after calling time on his 30 year reign.

The news comes after a very difficult week for the company, which was the first within the Australian media industry to dump its annual earnings guidance because of the fallout from COVID-19. The health crisis has hit the economy hard, with companies pulling spending during the uncertainty.

Mr Cook has ruled out any job losses for now, saying the group is focused on delivering cost savings of $45m-$65m by cutting operating and capital expenditure.

He said the business, which employs about 850 staff in Australia and New Zealand, is "fit for purpose", noting it underwent a major restructure following its $570m acquisition of Adshel from Here, There & Everywhere's Adshel in 2018.

"Our first goal is get people to use up all their leave and various other activities," Mr Cook told The Australian.

"We have no intention of making any one redundant."

As revealed by The Australian’s DataRoom, the group's $167m equity raising, which has been fully underwritten by Macquarie Capital, will consist of a placement to shareholders to raise about $39m. Plus, an entitlement offer to raise $128m.

The raising will result in around 315m new shares sold at 53c a share, representing a 37 per cent discount to its closing share price of 84c on March 19.

US investment firm HMI has backed oOh!media's capital raising, which could result in its stake in the group jumping from 19 per cent to up to 25 per cent. However, that will depend on the investor demand during the raising, and will need Foreign Investment Review Board approval for HMI to increase its stake above 20 per cent.

oOh!media will appoint Mick Hellman, founder and managing partner of HMI, to its board, and will nominate one board director to resign temporarily until its annual shareholder meeting because at present the company can only have seven board directors.

oOh!media's debt facility has been amended to increase the gearing covenant to 4.0 times net debt to underlying earnings for 2020 "just to give extra headroom if needed", Mr Cook said.

“They know how strong and quality the business is, and the measures that we can take to ensure that the business on reduced revenues can still perform strongly and still have our people working hard.”

The company's lenders include, Westpac, Commonwealth Bank, National Australia Bank, and a series of international banks.

Within the group's cost cutting plans, the company has identified savings of $20m-$30m in operating expenditure such as marketing, travel and replacement hires, plus fixed rent expense reduction during the current financial year. It will also cut its capital expenditure program by $25m-$30m from its previous guidance range of $60m-$70m.