A complex booklet setting out a Scheme of Arrangement which has been designed to save Ovato, one of Australia’s largest printing and distribution companies, has been approved by the NSW Supreme Court with some minor modifications relating to process.
Ovato today released a statement to the ASX advising that Justice Ashley Black has approved the Scheme Booklet.
The Scheme outlines a plan for the future viability of the company and the saving of 900 jobs by making 300 people’s jobs redundant, closing the Clayton factory in Melbourne and gaining creditor approval to accept a 50 cent in the dollar pay deal.
So long as these approvals are made, the Hannan family and Are Media Pty Ltd, an entity related to private equity firm Mercury Capital, will tip in $35 million for the forward operation of the print business as it looks to return to viability in 2021.
The next steps now is for creditors to meet on December 7 – revised from November 30 – to agree to the plan, as well as members of the companies involved.
A second NSW Supreme Court date is also scheduled for Friday, December 18.
A spokesman for Ovato said the Scheme of Arrangement is expected to receive its final approval at this time and Ovato Print Ltd, Hannanprint NSW Pty Ltd, Hannanprint Victoria Pty Ltd and Inprint Pty Ltd then placed in the hands of liquidators.
Depending on the approvals coming through, staff employed by these companies will on Monday, December 21 – the week of Christmas – be able to apply to the Federal Employment Guarantee (FEG) for their redundancy pay.
“They can’t apply until the Scheme is approved and liquidators are appointed,” the spokesman said.
“Liquidators can’t be appointed until the Scheme is approved and you can’t apply to FEGs until the liquidator is appointed but assuming all the approvals go through they can start planning to put in those applications very quickly and try and get them paid.
“The liquidator might have some money pending taking the FEGs money but that is up to the liquidator, not up to Ovato.
“The liquidator usually does everything it can to speed up the process and get the paperwork moving straight away but it is up to the liquidator to work out if he’s got any money left.”
The hearing also saw further disclosures included in the Scheme relating to execution risks; the reasons why creditors may vote against the Scheme and the basis of employee dividends.
It also made available some extra information regarding McGrath Nicol’s assumptions on the future solvency of the company.
The Ovato spokesman confirmed the Scheme Booklet had been approved with minor changes relating to process.
“No material changes. Some minor changes to process. The rationale for the Scheme remains to save the business and 900 jobs while providing a return to creditors,” he said.
“The majority shareholder is injecting millions of dollars to save the company.”
In all, 300 employees are being made redundant around the country, mostly from Clayton with some positions also redundant in Sydney’s Warwick Farm and Brisbane’s Geebung factories.
Many staff have grave concerns about how they will fare over the Christmas break with one week’s pay while they wait for the FEG process to run its course so they can receive their redundancy pay-out given office closures.
The Australian Manufacturing Workers Union is also feeling the heat over a revised Enterprise Bargaining Agreement which has meant workers employed under the agreement will receive two weeks pay per year of service capped at 52 weeks, as opposed to the four weeks pay per year of service uncapped which existed in the previous agreement.
The union’s Lorraine Cassin has also expressed shock that the company had decided to send the staff to FEG, rather than pay them out themselves.
Alternative plan would have been worse
Ovato CEO Kevin Slaven said any alternative to this plan would have been worse for staff.
“The alternative to this restructure is all 1,300 Ovato employees losing their jobs,” Slaven said.
“That is clear from the independent expert’s report which is available for everyone to read. I am sure the alternative is not one that the union would prefer.
“The entitlements from FEGS are exactly the same as those that in the Enterprise Agreement negotiated this year. The liquidator will help employees access FEGS as soon as possible.”
The unfolding plan to resize one of Australia’s largest printing and distribution companies is continuing to cause reverberations throughout the print sector with many concerned this kind of plan will set a dangerous precedent.
But Ovato remains steadfast this is the best way forward, and the only option, to ensure the future viability of the business and the employment of 900 staff.
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