Ovato rescue step 1 over the line
Print giant Ovato has passed the first hurdle in its restructuring plan, gaining court approval to present its plan to take the company forward from its current difficulties to its creditors and members, with a vote in a fortnight's time.
The NSW Supreme Court made only minor modifications to the Scheme of Arrangement, which will see the Clayton site close, 300 jobs go, and creditors asked to take a 50 per cent haircut on their outstanding invoices.
Under the Scheme Ovato is proposing to transfer the assets and businesses of four of its companies – Ovato Print, Hannanprint NSW, Hannanprint Vic, and Inprint – into Ovato, and in Inprint’s case also into two other group companies. The four companies will then be liquidated, 300 staff they employ made redundant, with the taxpayer through FEGS to pick up most of the redundancy costs.
The Scheme will now go to a vote of members and creditors, which the court pushed back by a week to 7 December. Following the vote the Scheme will go back to the court on 18 December for final authorisation.
If the vote goes in the company’s favour it will then go to market to raise $40m in a rights issue, $35m of which will be underwritten by the Hannan family and the company’s major customer, magazine publisher Are Media (formerly Bauer Media). The $40m will be used for liquidity, to pay down debts, and for operational activities.
The company’s share price shot up by 30 per cent on news that the court had sanctioned the Scheme to go to creditors and members.
CEO Kevin Slaven said, “Our industry has gone about as far as it can with mergers and consolidations in the last five years. Ovato has suffered losses for several years because of the costs of measures to meet the reduced demand for printed communications. This restructure allows for the company to get back to profitability and a sustainable future.”
Ovato lost $109m in the last financial year as sales plunged by 41 per cent in the Covid period, with revenue down by $130m to $593m.Pre-Covid sales were down by nine per cent.
The company has said if its restructuring plan does not succeed the company faces an “unpalatable outcome”, with the jobs of its remaining 900 strong workforce on the line.
The main printing equipment from Clayton, including the manroland Lithoman presses, will not be redeployed within the group. All printing from Clayton will be transferred to Warwick Farm. The company made the decision to cease manufacturing in Victoria as the lease on its Clayton site was up, leaving it with the choice of either starting a new greenfield site, or switching the print to the new supersite in Warwick Farm, which in the current circumstances has the capacity.