From Nick Bonyhady at the Sydney Morning Herald, a story about the possible multi million dollar cost to taxpayers as a result of the proposed Ovato restructure, which is backed by Mercury Capital, owners of Are Media (formerly Bauer Media).
Printing giant seeks ‘restructure at the taxpayer’s expense’
A company controlled by one of Australia’s richest families has gone to court asking for a restructure that would see the taxpayer foot the bill for millions of dollars in workers’ entitlements.Printing giant Ovato, which rolls magazines including The Australian Women’s Weekly and TV Week off its presses, is set to get a cash injection of $40 million backed by some of its largest shareholders including the wealthy Hannan family as part of the same restructure.
Australia’s taxpayer-funded Fair Entitlements Guarantee scheme is designed as a “last resort” to cover workers’ redundancy and leave payouts when a company collapses without enough money to cover them and there is no legal barrier to Ovato using it to restructure.
Ovato argues the restructure, which involves the loss of about 300 jobs in cities including Melbourne and Sydney, is necessary to keep the broader company afloat and save many more jobs in the future as the economy continues to struggle.
A report from advisory firm McGrathNicoll commissioned by Ovato said after the restructure about 300 workers would be employed by four Ovato companies with few assets and an estimated $18.3 million owing in workers’ entitlements.
The companies “will have no ongoing business or purpose and as a result in my opinion… will be insolvent” the report reads.
In documents released to the stock exchange, Ovato notes its former employees could turn to the FEG, which has seen its cost spiral from about $60 million in 2007-8 to a predicted $1.3 billion over the next three years.
Australian Manufacturing Workers Union official Lorraine Cassin branded Ovato’s actions a “disgrace” because workers face a delay getting their entitlements through FEG during the Christmas season and had repeatedly compromised with the company to keep it running.
Read the rest of the article here.
If true, this would be appalling. I would not want taxpayer funds used to settle costs flowing from any restructure.
Agree Mark the use of the Fair Entitlements Guarantee Scheme in a restructure doesn’t sit well but I guess we need to look at the alternative.
Should the proposed schemes of arrangement not proceed then the entire Ovato Group will more than likely be forced into liquidation . If this were to happen then all Ovato employees will be redundant just before Christmas and looking for their entitlements. The unsecured creditors would receive far less than their proposed 50 cents in the dollar and ARE would be seeking an alternative print option for their magazines.
We would not be spared and this could ultimately be disastrous for our channel should the proposal not proceed in 10 days time.
Steve, you are correct if the assumptions are executed as a result of what is presented here.
My experience is that the work currently going on behind the stated is a lot different. look what happened with the doomsayer reports of Virgin.
Money is cheap and cashed up vulturs are everywhere Deals will be made , magazines and distribution have a future especially with such a great distribution reatils system provided by newsagents. The only argument left is the price of takeover.
Ovato’s business model is stuffed The product the distribution and the outlets are in place Time for a new model at a price. It will come. have faith our life does not depend on failure, Ovato is failure.
Shameful if this happens.