A complicated plan to save Australian print giant Ovato by cutting capacity would see trade creditors being paid only half what they are owed.

With the business created by the 2016 merger of PMP and IPMG already in difficulty before COVID-19 hit, the company is proposing to creditors and shareholders that its Clayton (Melbourne) print site be closed and that a $40 million rights issue provide additional working capital.

It is being proposed that $35 million of the $40m rights issue would be underwritten by the Hannan family and magazine publisher Are Media, which is a major customer. Some 300 employees would lose their jobs.

Ovato lost $109 million last financial year after its revenue fell by $130 million.