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Toshiba faces up to asset sales

November 21, 2017

The Japanese OEM’s financial predicament is forcing it to consider jettisoning various assets.

Toshiba Corporation is considering the possibility of selling some of its assets in order to remedy its recently-published negative consolidated balance sheet.

The OEM’s Board of Directors has decided to proceed with a financing transaction, which it expects will close on the 5th of December this year.

If successful, Toshiba expects that the ¥750 billion ($6.6 billion/€5.6 billion) of negative consolidated balance sheet will be remedied by the end of March 2018.

One of the options the company is currently considering is to sell its claims against Westinghouse Electric Company LLC, the nuclear power construction company owned by Toshiba. A press release by the OEM stated: “By obtaining funds necessary to offer to make early payment of the parent company guarantee and settling the obligations to creditors, Toshiba can obtain the right against Westinghouse to demand reimbursement of the amount paid by Toshiba.”

The alternative for Toshiba, should it wish to retain the Westinghouse assets yet still rescue its ailing financial fortunes, is to sell its chip business, although such a move has already faced difficulties becoming reality, with global antitrust regulators yet to sign off on the deal, and Western Digital Corp., the OEM’s memory-venture partner, fighting the sale in the US.

It has been speculated that Toshiba would be loath to sell its chip operations, despite a ¥2 trillion ($17.8 billion/€15.1 billion) deal with Bain Capital LP already being mooted. Although chips represented only 18.4 percent of Toshiba’s total sales in the last fiscal year, they provided nearly 70 percent of the operating profit.

Dropping the Westinghouse assets and shares, therefore, seems like the OEM’s current preferred option, with the latest press release confirming that it would explore the idea, with the hope that “the successful completion of such efforts will allow Toshiba to significantly reduce the internal resources that it is required to allocate to Westinghouse’s rehabilitation proceedings.”

The company has said that if such a sale is completed by March 2018, it would avoid a delisting of its shares, as well as remedying the negative balance sheet, which it describes as its two “pressing challenges.”

 
 

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