As Disclosure Deadlines Loom, Toshiba’s Westinghouse Brings In Bankruptcy Lawyers: Reuters

In a sign that owner Toshiba Corp is more seriously weighing a Chapter 11 filing as an option to help it rein in a multibillion dollar financial maelstrom, U.S. nuclear firm Westinghouse Electric Co LLC has hired bankruptcy attorneys.

The nuclear engineering company had not yet taken a decision on a bankruptcy filing but had brought in law firm Weil Gotshal & Manges LLP as an exploratory step, news agency Reuters reported citing people familiar with the matter.

Audited earnings by the company had been postponed a month ago and the Japanese conglomerate faces huge pressure to meet a Tuesday deadline to publish its earnings. The postponement was made to allow time to the company to probe potential problems at Westinghouse further.

And as it seeks to plug not only an upcoming $6.3 billion writedown for Westinghouse but also to create a buffer against future financial problems, it is also pushing forward with the sale of most or even all of its prized flash memory chip business.

It was not aware of any intention for Westinghouse to file for Chapter 11 bankruptcy, Toshiba said.

But as it struggles to limit losses in the United States where it is facing cost overruns at two projects, it is one of several options being considered, sources familiar with the company have reportedly told Reuters. Sources also reportedly said that to help estimate the impact of a U.S. bankruptcy for the broader group, it has also hired a Japanese law firm.

Westinghouse was one topic that he may discuss with U.S. officials when he visits in the near future and that a Chapter 11 filing would not necessarily be a negative step, Japanese Trade Minister Hiroshige Seko said on Wednesday.

“If the U.S. side raises the issue, it will be necessary to discuss it,” he told a parliamentary committee.

To help fund the construction of reactors at the Vogtle plant in Georgia, one of the two projects at the core of Westinghouse’s problems, financing guarantees given by the U.S. government may be one complication.

The loan guarantees totaled $8.3 billion, according to a 2014 statement on the U.S. Department of Energy Website.

Getting third-quarter earnings over the line is the most immediate challenge for newly appointed Chief Executive Satoshi Tsunakawa.

As Westinghouse auditors and lawyers were fussing over details, the likelihood of Toshiba meeting its March 14 deadline was ‘fifty-fifty’, reports Reuters quoting one source with direct knowledge of the matter. It has until March 27 to file or it could face a delisting if it fails to meet that deadline.

Hurt both by investor concern it may not make the deadline and Westinghouse’s hiring of bankruptcy lawyers, Toshiba’s shares slid to end down 7 percent, giving it a market value of just $7.5 billion.

A source said that invitation letters to around 10 potential bidders has been sent by Toshiba.

So far the only suitor to acknowledge publicly its plans to bid is Taiwan’s Foxconn, the world’s largest contract electronics maker. SK Hynix Inc has said it is considering a bid.

Rival Micron Technology Inc, as well as financial investors such as Bain Capital, data storage firm Western Digital Corp which operates a Japanese chip plant with Toshiba, and Taiwan’s TSMC, the world’s largest contract chip manufacturer, are among the other potential bidders, sources have said.

(Adapted from Reuters)


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