By Paul Vieira
OTTAWA--The Canadian government said Friday it would provide extraordinary financing to Canada Post to avoid insolvency at the state-owned mail service.
The bridge financing totals 1.03 billion Canadian dollars, or the equivalent of $720 million, and will be provided on an as-needed basis to pay obligations. The government said Canada Post will fall below its necessary operating cash requirements this year.
"Providing this cash injection will prevent insolvency and ensure the continuity of postal services," the government said.
The cash injection is the latest setback at Canada Post, which was hit by a month-long strike late last year as the postal service and the union representing 55,000 workers far apart on the issue of pay increases. Canadian Labor Minister Steven MacKinnon intervened last month to pause strike activity, and appointed an arbitrator to bring the two sides to an agreement by late May.
The postal service recorded a wider net loss of C$210 million in the third quarter, relative to the comparable year-ago period. In the third-quarter report, Canada Post said it had immediate access to C$100 million from existing lines of credit until the end of 2024. "This amount is insufficient to cover the projected cash shortfalls and may not ensure the corporation has adequate and timely access to capital markets."
In July, Canada Post has C$500 million of bonds that will mature.
Canada Post, like other government-owned mail carriers, has struggled financially as households and businesses use alternative methods, like email, to deliver information and services to customers. At its peak in 2006 Canada Post handled 5.5 billion letters annually. Volumes have since plunged 60%, according to the postal service.
In providing the bridge financing, the Canadian government said "it is clear that the corporation must be put on a path to viability."
In its own statement, Canada Post said it is committed to working with the government to introduce major structural changes to secure a sustainable financial model. It said it has incurred significant annual losses since 2018 due to changes in the delivery sectors, high labor costs, and long-standing regulatory measures that impede the company's ability to compete.
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
01-24-25 1515ET