Chip Shares As Collateral For Loans Offered By Toshiba : Reuters

To secure debt refinancing, shares in its memory chip unit to creditors as collateral I being offered by Japan’s crisis-racked Toshiba Corp, reported the news agency Reuters citing people briefed on the matter.

A day earlier, the conglomerate said it would ‘actively consider’ selling a majority stake in the Westinghouse nuclear unit at the center of its troubles and missed submitting audited third-quarter earnings for a second time.

As collateral, stakes at other group firms such as Toshiba Tec Corp, a cash register company, as well as real estate were also reportedly offered by Toshiba at a meeting with creditors on Wednesday, says Reuters.

Creditors have been asked to respond by March 24.

The sources said that for a violation of a covenant in a syndicated loan, it asked for its third one-month extension of a waiver.

They would give Toshiba their full support, the sources said. Representatives for the banks were not available for comment outside of regular business hours, said its main banks – Sumitomo Mitsui Banking Corp, Mizuho Bank and Sumitomo Mitsui Trust Bank.

But sources claimed that saying Toshiba should sell the stakes and pay back the money instead of offering them as collateral, some regional bank officials attending the near two hour meeting expressed frustration.

There was nothing to announce right now and Toshiba is considering various options to secure funds, a company spokesman said.

To cope with an upcoming $6.3 billion writedown for Westinghouse and to create a buffer for potential losses down the road, the TVs-to-construction conglomerate is putting up most or even all of its prized memory chip business for sale.

In a move that would help the government prevent a sale to bidders it deems risky to national security, a Japanese state-backed fund, the Innovation Network Corporation of Japan (INCJ), may invest in its memory chip business as a minority partner.

Sources said that since some people within the government are concerned it could be seen as a publicly funded bailout, discussions on a potential investment are, however, at a very early stage and may not develop further.

With less than half of what it was worth in December, Toshiba now has a market value of just $7 billion.

In an automatic move that follows Toshiba’s failure to clear up concerns about its internal controls a year and a half after a 2015 accounting scandal, the Tokyo Stock Exchange placed the stock on its supervision list on Tuesday.

The shares were now “untouchable” for institutional investors who cannot invest due to compliance reasons by the bourse’s action, market participants said.

A report on internal controls was submitted by Toshiba on Wednesday and if the bourse is not satisfied with the report, Toshiba would be delisted. Internal control lapses since 2005 must also be addressed in the report and it has been required since the 2015 accounting scandal.

“Crucial details about Westinghouse won’t be there. Toshiba is already in trouble for delaying the filing of its quarterly earnings twice, and without the complete report, the exchange is unlikely to find its report satisfactory,” said Fumio Matsumoto, a senior fund manager at Dalton Capital Japan.

(Adapted from Reuters)

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Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability, Uncategorized

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