Toshiba Corp's U.S. Nuclear Unit, Westinghouse, Filed For Chapter 11 Protection Today

Toshiba Corp's U.S. nuclear unit Westinghouse filed for Chapter 11 protection from creditors on Wednesday, as its Japanese parent seeks to limit losses that threaten its future.

The bankruptcy filing will allow Pittsburgh-based Westinghouse, whose nuclear plant projects have been dogged by delays and cost overruns, to renegotiate or break its construction contracts (although the utilities that own the projects would likely seek damages) to mitigate Westinghouse-related liabilities totalling $9.8 billion as of December, 2016 compared to an earlier estimate of $6.3 billion stemming from guarantees it provided. As a result, the Japanese industrial conglomerate said it may book a net loss of 1 trillion yen ($9 billion) for the year ending in March, up from an initial forecast of a 390 billion yen loss.

The move is expected to trigger complex negotiations between the Japanese conglomerate, its U.S. unit and creditors, and could embroil the U.S. and Japanese governments, given the scale of the collapse and U.S. government loan guarantees for new reactors in Georgia ($8.3 billion) and South Carolina.

Westinghouse, which made the filing at the U.S. Bankruptcy Court for the Southern District of New York, said it has secured $800 million in financing to fund and protect its core businesses during its reorganization. Toshiba, whose shares have crashed as Westinghouse's problems surfaced, said in a statement it would guarantee up to $200 million of the financing for Westinghouse, adding that the troubled unit would be removed from its consolidated books at the end of the month....

Westinghouse has nuclear projects in varying degrees of development in India, the United Kingdom and China, and the company said that its operations in Asia, Europe, the Middle East and Africa would not be impacted by the filing...

Chip Business Sale

Toshiba has been selling other assets including its prized chip unit - the world's second-biggest NAND chip producer which it values at least $13 billion - to bolster its balance sheet. Toshiba will close the first round of bids for its chip business on Wednesday...About 10 potential bidders have shown interest, including:

  1. Western Digital Corp. (NASDAQ:WDC) which operates a Japanese chip plant with Toshiba,
  2. rival Micron Technology, Inc. (NASDAQ:MU),
  3. South Korean chipmaker SK Hynix Inc. and
  4. financial investors like Bain Capital with the highest bid likely to be from
  5. Foxconn Technology Co., the world's largest contract electronics manufacturer. Sources have said the Japanese government is likely to block any sale to Foxconn due to its deep ties with China.

The government-backed Innovation Network Corporation of Japan, and Development Bank of Japan are unlikely to join the first round, sources said, although they were expected to enter later bidding rounds as part of a consortium.

Nuclear Revival Fizzles

Toshiba acquired Westinghouse in 2006 for $5.4 billion, then a major bet on a rebirth in nuclear projects due to high oil and gas prices, and a conviction governments would cap carbon emissions to prevent global warming.

The company expected that it would win contracts to build dozens of its new AP1000 reactors, allowing it to build a pipeline of future work for its nuclear power plant maintenance division...

The company, founded by American engineer and inventor George Westinghouse in 1886, employs 12,000 people worldwide, according to its website.

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