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Ovato to cut 300 jobs and raise $40m in restructure

Print giant Ovato Limited announced a $40m rights issue and filed for a Scheme of Arrangement in the NSW Supreme Court that will see the restructuring of Ovato Print and lead to 300 redundancies and closure of the Clayton site in Victoria. Creditors will be asked to accept 50 cents in the dollar.

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"Ovato Limited announces its intention to shortly undertake a $40 million rights issue to existing shareholders and that it has today filed an application for a creditor and members' Scheme of Arrangement in the New South Wales Supreme Court (Schemes) with a view to effecting a restructuring and recapitalisation of the Ovato Group," the company told the ASX.

The key terms of the Creditors' Scheme will include:

(a) the scheme administrators paying to the Scheme Creditors 50c for each $1.00 for the unsecured portion of their amounts owing as at 11:59 pm on 6 November 2020 (Voting Entitlement Record Date); and

(b) the Scheme Creditors releasing the Creditor's Scheme Companies from all claims in connection with the amounts owing to the Scheme Creditors after to receiving the 50 cents in the dollar payment in respect of their unsecured portions.

The Hannan Family and a Mercury Capital entity, Are Media Pty Limited have agreed to underwrite $35 million of the rights issue (subject to completion of customary due diligence). The funds raised will be used primarily to provide for additional liquidity, repay debt and undertake operational initiatives.

The region’s largest printing company flagged the job cuts in August as it posted a net loss of $108.8 million for 2020, with sales revenue down by $130 million, mostly due to the impact of Covid-19. 

In its statement to the ASX today, Ovato said the restructure was aimed at avoiding possible insolvency.

“The primary purpose of the Creditors’ Scheme is to seek a compromise from the major creditors of Ovato Print Pty Ltd and to bring about a reduction in the capacity and size of the workforce of the Group's printing business which has been adversely affected by structural trends in the industry and the pandemic. 

“The Members’ Scheme will also involve the restructuring of Ovato Print Pty Ltd and, amongst other things, lead to 300 redundancies upon the closure of the Clayton site in Victoria. The cost of these redundancies will be addressed through the Schemes.”

ovato ceo kevin slaven
 The proposed restructure will secure
   900
jobs: Ovato CEO Kevin Slaven

Kevin Slaven, CEO of the Ovato Group, said: “I am pleased that with the support of the AMWU and our staff we have been able to enter into an amended Enterprise Bargaining Agreement with new terms which has made our recapitalisation plan possible. This could also only have been achieved with the support during the Pandemic of the Australian Government through the JobKeeper scheme.

“The proposed new equity, underwritten by two significant players in the printing and media sectors, together with the indicative support of our major suppliers and financiers to restructure our balance sheet, provides the foundation for a viable, sustainable and exciting future for our Group.

“The proposed recapitalisation and restructure will also support the security of 900 jobs across the manufacturing sector in Australia and New Zealand.

“We look forward to progressing the Schemes and proposed rights issue over the next few weeks securing the continuation of our proud history of providing innovative solutions for our clients and turning their audiences into customers.”