First leg of Ovato’s survival plan gains court approval

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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5 thoughts on “First leg of Ovato’s survival plan gains court approval

  1. Here is what stinks about this whole charade….

    1. The report they lodged with ASX 29th October stated they had 37 months of available funding available….. in that it states available headroom included a Factoring Facility of $50m not fully drawn. How is that not misleading the market? They had 37 months signed off by their Management. NOW look at page 311 of 625 of today’s (19/11/20) Approval of Scheme PDF. McGrath Nichol state “In my opinion, if the Proposed Restructure is not implemented, the Ovato Group would be unable to pay its debts as and when they fall due from at least January2021. On the assumption that creditor payments are incurred at least 30 days prior to the time that payment is due, the Ovato Group will be trading whilst insolvent from at least December 2020” If McGrath Nichol are accurate wasn’t the ASX announcement misleading? They were two months off insolvency apparently? Pretty sure that misleading the ASX is a no no! Write to the ASX Lorraine….. ask the question.

    2. How can they negotiate a deal to save jobs by reducing entitlements and then make 300 people redundant? Is that acting in Good Faith?

    3. Why aren’t they paying the entitlements themselves? That would actually make the whole anger of the industry go away and the staff sadly let go would have some money for Christmas instead of being in a world of hurt navigating the FEGs process.

    4. Can the CFO’s $420k bonus be clawed back? Preferential Treatment? Not sure but it seems rough he get’s that.

    5. In the document today (19/11 – page 52 of 625) Ovato are assuming that the can burn the big paper suppliers for 50% and expect a 1.5% price reduction on paper and 2.5% for ink. That’s not how it works?

    Lorraine, you need to fight back for your members here… God Speed.

  2. For anyone wondering who the scheme creditors are that have to vote on this here they are. They are in the PDF but who has the time to read it. If you don’t agree on the fact that you’re paying for this instead of Ovato give them a call:

    Scheme Creditors
    1.UPM Asia Pacific Pte. Ltd
    2.Sappi Trading Australia Pty Limited
    3.Norske Skog (Australasia) Pty Limited
    4.Kodak (Australasia) Pty Ltd
    5.Stora Enso Publication Papers Oy Ltd
    6.Manroland Goss Web Systems Australasia Pty Ltd
    7.Ferag Australia Pty Ltd
    8.Progressive Green Pty Ltd T/A Flow Power
    9.Origin Energy LPG Limited
    10.Commissioner of Taxation (Cth)
    11.Chief Commissioner of State Revenue (NSW)
    12.Commissioner of State Taxation (SA)
    13.Commissioner of State Revenue (Vic)

  3. The same guy Ovato were hammering about Geon is handling this “Scheme”. Shaun Fraser is his name. Interesting Fact of no real relevance.

  4. If Ovato sold their assets off I’m sure they could pay a lot of their staff out and do the right thing. There are over 110 pages of assets listed in the ASX release today that they are shifting to the new entity unchallenged. Very sad behaviour!

  5. Claiming a success in court is a bit over the top. A long way to go and J Black has many reservations, it was far from smooth and hopefully he sees through the smoke and mirrors.

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