Toshiba Corp. has sought financial assistance from the state-owned Development Bank of Japan as it expects an asset impairment loss of up to ¥700 billion ($6.17 billion) from its U.S. nuclear business, sources said Thursday.
With such a huge loss, Toshiba would face the risk of falling into a capital deficit, the sources said, adding the company will also seek to secure funds by spinning off its mainstay flash memory business and selling assets.
The DBJ is mulling possible investment in the Japanese electronics maker itself or in its flash memory business, the sources said.
Toshiba had estimated at the end of 2016 that it could book a loss of up to ¥500 billion but the yen’s recent fall against the U.S. dollar has apparently inflated the amount as the U.S. nuclear operations are denominated in a foreign currency. Costs related to the nuclear reactors the company is trying to complete have also likely ballooned.
While the electronics-to-nuclear conglomerate has estimated a net profit for fiscal 2016 ending in March, ballooning losses could lead Toshiba to post huge deficits and the company’s finances could fall into a critical situation.
Toshiba hopes to receive support from its main creditor banks and the DBJ through such means as the issuance of preferred shares, the sources said.
The firm asked for financial assistance from its main creditor banks on Thursday. The DBJ and the banks are expected to accept Toshiba’s request on condition that it also achieves profitability on its own through measures including selling businesses, according to the sources.
Toshiba has been focusing on nuclear power but it has struggled to secure orders for new plants both at home and abroad, particularly since the 2011 Fukushima nuclear disaster. The company said last month it was facing a multibillion-dollar write-down at its U.S. nuclear unit Westinghouse Electric Co.
Toshiba said Wednesday it is considering spinning off its flash memory business, in an apparent move to generate cash through the sale of a stake in the new entity to offset losses in its U.S. nuclear business.
Western Digital Corp. of the United States, which has jointly invested in manufacturing facilities at Toshiba’s Yokkaichi plant, is a potential investor.
Through the spinoff and asset sales combined with financial assistance from the DBJ and its creditor banks, Toshiba is likely to raise up to several hundred billion yen to help it get back on track.