Toshiba eyes ¥600 billion capital injection to prevent delisting if deal for chip unit delayed

Toshiba Corp. is considering raising at least ¥600 billion ($5.3 billion) in new capital to prevent its shares from being delisted in case the sale of its semiconductor business is delayed, sources close to the matter said Friday.

The tech conglomerate has begun gauging the interest of potential investors, and will decide before Dec. 31 whether to go through with the capital increase, the sources said.

The plan may require approval at an extraordinary general meeting of Toshiba’s shareholders if it leads to significant dilution of existing stock.

Hit by huge losses in its U.S. nuclear business, Toshiba’s net worth could tumble to minus ¥750 billion when its current business year ends next March, leading to its delisting from the Tokyo Stock Exchange.

To prevent this, Toshiba has agreed to sell its profitable chip unit, Toshiba Memory Corp., to a consortium led by Bain Capital for ¥2 trillion. But the sale is subject to reviews by antitrust regulators that could drag on past the March deadline. A continuing legal battle with Western Digital Corp., Toshiba’s chip joint production partner, could also derail the deal.

If Toshiba concludes it needs to raise capital through other means, the likeliest way would be to sell ¥600 billion of new shares to investment funds, and to sell off assets to secure the remaining ¥150 billion needed to wipe out its capital deficit, according to the sources.

Alternatively, Toshiba may seek to raise ¥800 billion to have additional money to invest in growth areas.

Many details are still undecided, including whether to raise cash by issuing preferred shares or convertible bonds, the sources said.

The latter are securities that would pay investors a fixed annual rate of return, but could also be converted into ordinary shares.