Postal Service reports $15.9 billion loss
WASHINGTON — The Postal Service on Thursday reported a record $15.9 billion net loss for the fiscal year that ended Sept. 30, bringing the financially troubled agency another step closer to insolvency.
The widely expected loss, more than triple the service’s loss last year, included accounting expenses of $11.1 billion related to two payments that the agency was supposed to make into its future retiree health benefits fund. But because of revenue losses, the post office was for the first time forced to default on these payments, which were due in August and October.
Nearly $5 billion in other losses were due to a decline in revenue from mailing operations. The agency also reached its $15 billion borrowing limit from the Treasury.
Despite its financial troubles, officials said that the post office would continue to operate as usual and that employees and suppliers would be paid on time.
The agency had warned that it could face a $100 million cash crunch in October because of a decline in revenue. But the agency reported more than $500 million in revenue from candidates, political parties and other interest groups sending out campaign mail before the election. The agency said the revenue from political mail and the holiday season should help its cash situation until Congress acts on legislation to overhaul the post office.
The agency’s financial reports show that mail volume continues to decline as Americans have increasingly turned to electronic forms of communication. Total mail volume was 159.9 billion pieces, down 5 percent from 168.3 billion pieces a last year. Operating revenue was $65.2 billion, down from $65.7 billion over the same period.
For nearly a year, the agency has been urging Congress to pass legislation that would allow it to save costs including cutting back the number of days it delivers mail to five days a week, reducing annual payments required for its future retiree health fund and entering into new lines of business like delivering beer and wine by mail.
Patrick R. Donahoe, the postmaster general, says Congress needs to act fast.
—Ron Nixon, The New York Times
In a switch, investors are buying European bank bonds
LONDON — European bank debt, once an investment pariah, is suddenly popular.
In recent weeks, money managers have been readily buying the new bonds of the region’s financial institutions, deals that just months ago would have seemed unpalatable. Bank of Ireland, which received a bailout in 2010, sold $1.3 billion of bonds on Tuesday and found strong demand. It was the largest offering by an Irish bank without a government guarantee in almost three years.
The gradual thawing of the capital markets is a good sign for the region’s banks. In the midst of the crisis, institutions, especially in troubled economies like Ireland and Portugal, have been struggling to raise money from private investors. The latest deals will help bolster banks’ capital levels and strengthen their balance sheets.
But the bonds could leave investors exposed, especially given the precarious situation in Europe. The sovereign debt crisis continues to weigh on the economy. The financial markets remain volatile. And profit at the region’s banks is flagging.
“It’s a great time to be issuing high-yield debt but not to be investing in it,” said Robin Doumar, managing partner at the private equity firm Park Square Capital.
For now, bondholders are taking comfort in the policymakers’ response to the sovereign debt crisis.
—Mark Scott, The New York Times