With $9.8 bn in liabilities, Westinghouse files for bankruptcy
Toshiba Corp’s US nuclear unit Westinghouse filed for Chapter 11 protection from creditors on Wednesday, just three months after huge cost overruns were flagged, as the Japanese parent seeks to limit losses that threaten its future.
Bankruptcy will allow Pittsburgh-based Westinghouse, once central to Toshiba’s diversification push, to renegotiate or even break its construction contracts, though the utilities that own the projects could seek damages. It could even pave the way for a sale of all or part of the business.
For Toshiba, the aim is to fence off soaring liabilities and keep the group afloat. Toshiba said Westinghouse-related liabilities totalled $9.8 billion as of December, making it one of the industry’s most costly collapses to date; it had earlier estimated writedowns would swell to $6.3 billion.
Toshiba said that as a result it expected to book a net loss of 1 trillion yen ($9 billion) for the year ending in March, up from an earlier loss forecast of 390 billion and one of the biggest annual losses for a Japanese company ever.
“Toshiba concluded that a Chapter 11 filing was essential to rebuild Westinghouse,” Toshiba CEO Satoshi Tsunakawa said at a news briefing in Tokyo.
Westinghouse’s bankruptcy, the latest financial debacle to buffet corporate Japan, comes on top of a separate 2015 accounting scandal for Toshiba. To cover upcoming losses, it has put its prized memory chip unit up for sale. “We expect the chip unit valuation will be at least 2 trillion yen ($18 billion), Tsunakawa said during the news briefing.
The bankruptcy filing will now trigger complex negotiations between the Japanese conglomerate, its unit and creditors, and could embroil the US and Japanese governments, given the scale of the collapse and US government loan guarantees for new reactors.
Westinghouse said it has secured $800 million in financing to fund and protect core businesses during its reorganisation.
Toshiba, whose shares have crashed as the nuclear problems surfaced, said it would guarantee up to $200 million of the financing for Westinghouse.
Westinghouse, which Toshiba acquired a decade ago, has nuclear projects in varying degrees of development in India, the UK and China. The US unit said its operations in Asia, Europe, West Asia and Africa would not be impacted by the filing.
The US business is at the heart of the collapse, stemming from the ill-conceived acquisition of a US nuclear construction company in 2015.
Japan fears Westinghouse’s collapse will incite criticism from US President Donald Trump over the impact it could have on local jobs and finances as the bankruptcy could increase costs borne by US taxpayers for two nuclear power plants projects in Georgia and South Carolina.
The US government granted loan guarantees totaling $8.3 billion to the utilities commissioning the Georgia project.
Japan’s government spokesman Yoshihide Suga said the two governments were having thorough discussions on the issue.