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Toshiba Reportedly Offering Equity, Real Estate as Loan Collateral

March 15, 2017
The Japanese icon has been grappling with construction delays and cost overruns on nuclear projects in its Westinghouse business, and is estimated to need to take a writedown of more than $6 billion.

Toshiba Corp. is offering stock holdings and real estate as collateral to lenders as it seeks additional financial support amid multi-billion losses in its U.S. nuclear business, according to people familiar with the matter.

The Tokyo-based company met with banks Wednesday afternoon and made the offer as it requested loan extensions through the end of April, said the people, asking not to be identified because the talks are private. Toshiba’s three main banks said they plan to continue their financial support, the people said.

The Japanese icon has been grappling with construction delays and cost overruns on nuclear projects in its Westinghouse business. Toshiba has estimated it will need to take a writedown of 712.5 billion yen ($6.21 billion), though it hasn’t been able to get auditors to sign off on the final figures. On Tuesday, Toshiba delayed reporting third-quarter financial results for a second time and said it may sell a majority stake in Westinghouse.

“At this point it is hard to determine the potential bottom for the company’s balance sheet,” Hideyuki Maekawa, a Tokyo-based analyst at Credit Suisse Group, wrote in a report.

Toshiba shares tumbled 12% in Tokyo trading and have dropped 33% this year. The company filed a report to authorities Wednesday detailing how it plans to improve internal controls. If deemed insufficient, the company will face delisting.

President Satoshi Tsunakawa held a press briefing Tuesday to try to reassure investors. He said the company will be moved to the second section of the Tokyo Stock Exchange, but declined to comment on the prospects of a delisting.

“We need further reforms to overcome the difficulties resulting from the accounting scandal and losses in the nuclear business,” Tsunakawa said. “That’s something myself, the management and employees have to take responsibility for and work toward bringing the company back on the path of growth.”

It wasn’t immediately clear which of Toshiba’s equity stakes are being offered as collateral. The company’s 55% holding in point-of-sale equipment maker Toshiba TEC Corp. is worth about 100 billion yen ($871.35 million). Stakes in chip-equipment manufacturer NuFlare Technology Inc., Toshiba Plant Systems & Services Corp., and industrial tool maker Toshiba Machine Co. could add more than 120 billion yen ($1.05 billion).

Toshiba has 60 billion yen ($522.81 million) of notes maturing this year and another 90 billion ($784.22 million) in 2018. The company hasn’t sold bonds since 2014, the year before a scandal over accounting broke. Both Moody’s Investors Service and Standard & Poor’s rate the company’s debt below investment grade.

To raise cash, Toshiba has already said it will move a significant stake in its flash memory operations. The company has sent letters soliciting offers for the chip business, seeking bids that value it at about 1.5 trillion yen ($13.07 billion), and expects replies by the end of the month, people familiar with the matter have said.

The Japanese conglomerate would be willing to sell the entire business. Potential bidders that have expressed interest in the the chip unit include Korea’s SK Hynix Inc., Taiwan’s Foxconn Technology Group, Western Digital Corp. and Micron Technology Inc., the people said. Among the financial bidders are Bain Capital, Silver Lake Partners and KKR & Co., the people said.

By Takako Taniguchi and Pavel Alpeyev

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Licensed content from Bloomberg, copyright 2016.

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