The board of the Japanese conglomerate has approved a Chapter 11 filing for its US nuclear unit Westinghouse Electric, seeking to limit billons of dollars in losses that have plunged Toshiba into crisis.
Westinghouse Electric announced on Wednesday it had filed for Chapter 11 bankruptcy protection from its creditors at a court in the Southern District of New York, following the approval of the Toshiba board for the procedure to go ahead.
"We are focused on developing a plan of reorganization to emerge from Chapter 11 as a stronger company while continuing to be a global nuclear technology leader," Westinghouse Interim President and CEO Jos Emeterio Gutirrez said in a statement.
Parent company Toshiba has sustained Westinghouse-related liabilities totaling $9.8 billion (9.07 billion euros) as of December, more than an earlier estimate of around $6.3 billion. As a result, the Japanese industrial conglomerate said it may book a net loss of 1 trillion yen ($9 billion, 8.3 billion euros) for the year ending in March, up from an initial forecast of a 390 billion loss.
Toshiba has lost more than half its market value since late December when it warned over a raft of problems at its US nuclear unit, including claims of accounting fraud by senior executives at the division.
As a result, Japanese financial regulators have given the company until April 11 to publish resultsfor the October-December quarter, which were originally due in mid-February. Toshiba delayed their release, saying it needed more time to probe claims of misconduct by senior managers at Westinghouse and gauge the impact on its finances.
US projects on the line
A bankruptcy filing would allow Westinghouse to renegotiate or break its construction contracts for several nuclear plant projects in the United States which have been dogged by delays and cost overruns. But it is likely to face damages from utilities that own the projects and have already been covering some of the costs in their monthly.
The future of Westinghouse has also played a role in recent bilateral talks between Japan and the United States, with Tokyo fearing that a collapse will incite criticism from the new Trump administration over the impact it could have on local jobs and finances.
The US government has granted loan guarantees totaling $8.3 billion (7.6 billion euros) to the utilities commissioning the Georgia project. Westinghouse also has nuclear projects in varying degrees of development in India, the United Kingdom and China.
Toshiba has previously warned it was on track to report a net loss of 390 billion yen ($3.5 billion, 3.2 billion euros) in the fiscal year to March, as it faced a writedown topping 700 billion yen at Westinghouse.
This month, Standard & Poor's cut its credit rating on Toshiba again, warning its finances were quickly deteriorating.
The Japanese giant is trying to spin off its prized memory chip business to raise cash, after earlier selling its medical devices unit and most of a home appliance business.
The latest crisis comes less than two years after Toshiba's reputation was badly damaged by separaterevelations that top executives had pressured employees to cover up weak results for years after the 2008 global financial meltdown.
uhe/jd (Reuters, AFP)