Toshiba Corp (TOSYY) shares closed higher in Tokyo Wednesday after a Japanese government official said the conglomerate's beleaguered U.S. nuclear division would file for bankruptcy protection.
The group has been looking at options for Westinghouse for several months after cost overruns and poor accounting at the U.S. unit have cost Toshiba more than $6.2 billion in goodwill writedowns and prevented the company from filing timely quarterly earnings with the Tokyo Stock Exchange.
A government spokesman told reporters in Tokyo Wednesday, however, that Westinghouse would seek Chapter 11 protection following a report in the Nikkei daily business newspaper that Toshiba board members had approved the moved.
Toshiba shares closed 1.15% higher in Tokyo trading to end the session at ¥219.6 each but have plunged more than 53% since news of the writedowns and costs crisis at Westinghouse were first revealed in December.
In an effort to reassure investors, Toshiba said last month that it expects to see an operating profit of ¥210 billion ($1.8 billion) in the fiscal year ending in March 2019 (corporate fiscal years typically begin on April 1) but cautioned that its full-year loss in the year ending in March would be €410 billion. Toshiba has previously said it would explore the sale of key assets, including all of its prized flash memory chip operation, which could be worth as much as $10 billion, to compensate shareholders.
A decision on Westinghouse's future has been complicated by disagreement among Toshiba's creditors over the best way to handle a restructuring of the unit.
Proponents of a Chapter 11 filing argue it would clarify Toshiba's liabilities and allow for restructuring of the parent to proceed and for the possible sale of Westinghouse. Opponents say court protection could force an already weakened Toshiba to repay liabilities linked to Westinghouse, exacerbating the financial crisis at the parent.
Toshiba is the guarantor on contingent liabilities at Westinghouse that were valued at ¥793.5 billion at the end of March. The U.S. government will also be taking a keen interest in the fate of Westinghouse due to its role as a guarantor of $8.3 billion of loans on Westinghouse's construction projects.