Struggling Japanese electronics and machinery giant Toshiba Corp. is accelerating a study on the possibility of filing for so-called Chapter 11 bankruptcy protection for its U.S. nuclear power plant unit, Westinghouse Electric Co., sources said.
Toshiba has dispatched a team to the United States for assessing impact of the possible Chapter 11 filing for Westinghouse, sources said Tuesday.
Through the use of the bankruptcy proceedings, Toshiba is apparently considering cutting off the risk of incurring additional losses from its U.S. nuclear business, according to the sources.
Chapter 11 of the U.S. bankruptcy code is seen as effective in helping a company achieve rehabilitation quickly in a transparent manner based on a turnaround program approved by a court while being allowed to continue business operations.
Toshiba is speeding up its assessment work in the run-up to a board meeting for endorsing its consolidated earnings for April-December last year, which are set to be announced on March 14, the sources said.
Specifically, the company has asked a U.S. law firm and others to estimate the amount of possible additional costs.
In fiscal 2016, which ends on March 31, Toshiba expects to suffer a loss of ¥712.5 billion from its nuclear business.
According to the sources, Toshiba would be able to limit additional losses and burdens if it promotes revisions to its nuclear plant construction deals and reduces debt through the possible Chapter 11 filing.
But as Toshiba has guaranteed Westinghouse’s debt worth some ¥800 billion as of the end of March 2016, it could face additional losses, the sources said.
A senior official from a financial institution said the Chapter 11 filing would increase Toshiba’s losses by hundreds of billions of yen.
If Westinghouse files for bankruptcy protection under Chapter 11 within this month, Toshiba could not only see negative shareholder equity but also face an excess of debts on a net asset basis, sources said.
As Toshiba’s creditor banks could withdraw loans from the company under such circumstances, some Toshiba officials are cautious about using Chapter 11.
Meanwhile, most Toshiba creditors have agreed to continue loans to the company through the end of this month.
With some creditors urging Toshiba to drastically review its nuclear business, the company and creditor banks are expected to discuss financing for April and later at their meeting on March 15, the day after the planned announcement of the firm’s earnings in the first three quarters of fiscal 2016, the sources said.