Japan’s Toshiba Corp has informed its main lenders it is planning for US nuclear unit Westinghouse Electric Co LLC to file for bankruptcy on March 31, people briefed on the matter said yesterday.
Toshiba expects a Chapter 11 filing for Westinghouse would expand charges related to the US unit in the current financial year to around ¥1tn ($9bn) from its publicly flagged estimate of ¥712.5bn, the people also said.
A move to file, however, allows the TVs-to-construction conglomerate to limit risks from future losses at Westinghouse, which has been plagued by huge cost overruns at two US nuclear projects.
The decision comes only three months after Toshiba first warned of multi-billion dollar charges for Westinghouse.
The ensuing financial maelstrom has already caused Toshiba to put up its prized memory chip unit for sale, consider a sale of a majority stake in Westinghouse and miss deadlines to file earnings that have put it at risk of a delisting.
Toshiba is now in discussions with the lenders over financing after Westinghouse’s potential Chapter 11 filing, said the people, who declined to be identified as they were not authorised to speak to media on the matter.
Toshiba said yesterday it was not appropriate to comment prematurely.
“Whether or not Westinghouse files for Chapter 11 is ultimately a decision for its board, and must take into account the various interests of all of its stakeholders, including Toshiba and its creditors,” it said in a
statement.
Toshiba’s main creditor banks include Sumitomo Mitsui Banking Corp and Mizuho Bank Ltd.
Representatives for the bank were not immediately available for comment outside regular business hours.
Reuters reported earlier this week that Westinghouse was reviewing proposals for a debtor-in-possession loan exceeding $500mn to help finance a potential bankruptcy.
Shares in Toshiba soared 7.6% yesterday after Singapore-based fund Effissimo, established by former colleagues of Japan’s most famous activist investor, became its largest shareholder with an 8.14% stake.
The fund said the holding was for pure investment purposes and it expected long-term price gains to be driven by an increase in Toshiba’s corporate value.
Separately the Japanese government said it would conduct rigorous screening of any potential buyer of Toshiba’s chip unit based on foreign exchange and trade laws if need be.
The Japanese government is prepared to block the sale to bidders it deems a risk to national security, sources have said previously.
“Toshiba’s chip business is highly competitive globally and it plays a key role for the nation’s employment,” Trade Minister Hiroshige Seko said at a media briefing yesterday.
“The seller needs to consider these issues before the buyer is decided if the business is going to be sold to foreigners,” he added.
Toshiba also plans offer shares of the chip unit as collateral to its lenders, aiming to protect the unit from claims by Westinghouse creditors, sources have said.
Toshiba expects a Chapter 11 filing for Westinghouse would expand charges related to the US unit in the current financial year to around u00a51tn ($9bn) from its publicly flagged estimate of u00a5712.5bn, people briefed on the matter said yesterday.
