Israel Post Could Become Insolvent in Q3 This Year

Postal company CEO says company will meet obligations by selling assets.

The postal system could be insolvent by the third quarter of this year, according to a report obtained by TheMarker and presented to the state-owned postal company’s board of directors last week. The document was presented by Oren Levian, a senior official at the Communications Ministry who is responsible for the operations of the postal bank.

He surveyed the cash flow of the Israeli postal company and the postal bank for this year and next, and took the management of the post office to task for financial reports that he deemed overly optimistic. “The [postal] company is managing to create a positive cash flow from its ongoing operations,” Levian noted, “but [they are] substantially lower than the same period in September 2012. An analysis of trends from the [financial] reports reveals that there is material concern over substantial cash-flow difficulties in the course of its ongoing operations already in 2014, including a transition to a gross loss in the first quarter of 2015.”

The postal company’s CEO, Haim Almoznino, said in a written response that although the ongoing sources of revenue of the post office will not be sufficient to meet its obligations, the company has 60 million shekels ($17.2 million) on deposit at Bank Yahav that will enable it to finish the year, and other assets valued at about a billion shekels.

The company, he said, should be able to sell about 120 million shekels of those assets next year and meet all of its payment obligations.

Levian said management of the postal company, which is formally known as Israel Post, has failed to stabilize its profitability or bring about any kind of improvement in its revenues, despite periodic adjustments to postal rates. “The company has had substantial and ongoing increases in its wage costs, averaging 60 million shekels a year between 2010 and 2013. There were additional increased costs in the interest paid to bondholders as a result of an additional lowering of [Israel Post’s] credit rating. It appears the company is having difficulty funding continued ongoing operations,” Levian warned.

“It’s possible to see that in the course of the third quarter of 2014, the postal company will not be expected to fund its operations from its current independent sources and, at that stage, it would be in real danger of insolvency,” he added.

Emil Salman