Business / Corporate

Verging on negative net worth, Toshiba preps stake sales to raise cash

Kyodo

In an effort to avoid falling into negative net worth amid huge losses from its U.S. nuclear business, beleaguered Toshiba Corp. is set to push ahead with plans to generate cash by selling stakes in group companies, sources close to the matter said Saturday.

The conglomerate is seeking support from financial institutions as it could incur a group net loss for the third straight year in the current fiscal year through March.

By reviewing its group-wide operations, the company will try to persuade lenders it is serious about restructuring through the sale of group businesses and assets, the sources said.

Toshiba said last month it may book an asset impairment loss of several billion dollars as it will write down the value of assets in its U.S. nuclear business. But it may need to log a bigger loss of up to ¥700 billion ($6.1 billion), people familiar with the matter said Thursday.

The company had shareholders’ equity of ¥363.2 billion as of the end of September, or just 7.5 percent of assets. That is well below the 30 percent level seen as a healthy financial condition.

Earlier in the week, Toshiba said it is considering spinning off its key flash memory business. The company may sell a 20 percent to 30 percent stake, a person close to the matter said.

Fujio Mitarai, chairman and chief executive of Canon Inc., said Friday in an interview that the maker of printers and other office equipment is considering buying a stake in the spun-off company.

Toshiba is looking to raise several hundred billion yen through the sale and an additional ¥300 billion by unloading other assets and operations, the sources said.

“We will do whatever it takes to raise as much cash as possible,” a senior Toshiba official said.

Toshiba has seven group companies listed on Tokyo stock markets, such as office equipment maker Toshiba Tec Corp. and engineering firm Toshiba Plant Systems & Services Corp.

In 2015, Toshiba considered selling Toshiba Tec in the wake of an accounting scandal but scrapped the plan given the subsidiary’s sluggish business at the time.

Toshiba is also eyeing the sale of privately-held subsidiaries to streamline its group operations. Its money-losing nuclear operations are likely to continue to weigh on its bottom line, even if the company manages to avoid negative net worth in the current fiscal year.

Meanwhile, Toshiba is expected to receive support for its sales of liquefied natural gas from a joint venture of a subsidiary of Tokyo Electric Power Company Holdings Inc. and Chubu Electric Power Co., another source familiar with the matter said Saturday.

Jera Co., a 50-50 venture launched in 2015, has agreed to assist Toshiba’s LNG sales and marketing.

In 2013, Toshiba announced it has signed a deal with a U.S. firm to reprocess U.S.-produced natural gas into 2.2 million tons of LNG annually over 20 years from 2019.

Toshiba aims to procure LNG from the United States for power generation by Japanese utilities. LNG prices have been on the decline compared with 2013.

Toshiba had said it could see a loss of up to ¥1 trillion if the planned LNG sales do not fare well.

Coronavirus banner