Toshiba Corp. said the board of its nuclear unit Westinghouse will decide whether to file for bankruptcy, suggesting that is one option under consideration as it struggles with billions of dollars in liabilities from cost overruns on nuclear construction projects.
“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 is not appropriate for Toshiba to comment prematurely,” the Tokyo-based company said in an emailed statement.
The electronics conglomerate has been grappling with construction delays at Westinghouse projects. Toshiba has estimated it will need to take a write-down of ¥712.5 billion ($6.2 billion), though it hasn’t been able to get auditors to sign off on the final figures. The company said earlier this month that it’s reevaluating Westinghouse’s position within the group and it may deconsolidate the nuclear unit by selling a controlling equity stake.
“Westinghouse’s bankruptcy is really the only way for Toshiba to limit the risks of further losses in the business,” said Kazunori Ito, an analyst at Morningstar Investment Services. “If there is a reason for the shares to be up today, it may be because some believe that the Chapter 11 process is coming along.”
Westinghouse also appears to be already assembling a team of lawyers and advisers to help with the restructuring. The company has hired PJT Partners Inc., sources have said. Lisa Donahue of AP Services LLC, an affiliate of AlixPartners, will lead the Pittsburgh-based company’s operational restructuring efforts, according to a spokeswoman at Westinghouse.
Westinghouse’s customers, the utilities Scana Corp. and Southern Co., have hired advisers in preparation for its possible bankruptcy, Reuters reported, citing unidentified people familiar with the matter. It also brought in bankruptcy attorneys from Weil Gotshal & Manges LLP, Reuters reported earlier.
Scana and Southern Co. could end up dealing with billions of dollars in additional cost overruns from the power plants they hired Westinghouse to build, according to Morgan Stanley. Utility owner Scana faces as much as $5.2 billion in higher costs that could drag its shares down 5 percent, Morgan Stanley analysts including Stephen Byrd said in a research note Wednesday. Cost overruns for utility owner Southern could reach $3.3 billion.
“We will continue to hold Westinghouse and Toshiba accountable for their responsibilities under our agreement,” Jacob Hawkins, a Southern spokesman, said. “We are monitoring the situation and prepared for any potential outcome.”
Sarah Cassella, a Westinghouse spokeswoman, declined to comment when reached by phone. Southern and Scana didn’t immediately respond to requests for comment on the Reuters report.
Toshiba has delayed its earnings announcement twice, saying it needed more time to examine reports of “inappropriate pressure” internally to push through the acquisition of a U.S. construction firm specializing in building atomic plants. Toshiba now has until April 11 to report earnings, though it can request another extension.
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