Toshiba To Explore Alternatives To Sell Westinghouse Related Assets

(RTTNews) - Japanese conglomerate Toshiba Corp. (TOSYY.PK, TOSBF.PK) said Sunday that it decided to explore alternatives to sell to a third party its claims against Westinghouse Electric Company LLC, including for reimbursement, along with the investment in Westinghouse, subject to obtaining certain required regulatory approvals.

Toshiba noted 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, and to focus them on cultivating its new businesses.

Following Westinghouse's filing of Chapter 11 in March 2017, Toshiba successfully negotiated with the owners of the Vogtle project, and entered into a settlement agreement in June 2017. The agreement sets the limit of Toshiba's parent company guarantee obligation at US $3.68 billion, and specifies that payments are to be made in installments during the period from October 2017 to January 2021.

In July, Toshiba also successfully entered into a settlement agreement with the owners of the V.C. Summer project, which sets the limit of Toshiba's parent company guarantee obligation at US $2.168 billion, and specifies that payments are to be made in installments during the period from October 2017 to September 2022.

However, both maximum guarantee amounts are specified in US dollars, and payments to both are to be made at the same time, exposing Toshiba to extremely high risks in respect of fluctuations in currency exchange rates associated with such huge amount of debt.

Further, since occurrence of the goodwill impairment in connection with Westinghouse's acquisition of CB&I Stone & Webster Inc., Toshiba has been required to devote material internal resources in monitoring and participating in Westinghouse's Chapter 11 proceedings.

Toshiba believes that it is the best interests of Toshiba and its stakeholders to resolve as many issues in connection with Westinghouse's Chapter 11 proceedings as it can, as soon as practicable, in order to focus Toshiba's internal resources on its core business.

So, Toshiba said it has decided to find the necessary funding to offer to make early payment of the parent company guarantee obligation in the full amount, and to obtain the right to demand reimbursement from Westinghouse of the amount paid. Toshiba intends to sell its claims to a third party, including such reimbursement against Westinghouse, and also Westinghouse-related interests that it holds.

Separately, Toshiba said it has decided to proceed with a financing transaction expected to close on December 5, 2017.

The proceeds from the Financing will be used to offer to make full payment of parent company guarantee related to nuclear power construction project of Westinghouse Electric Company LLC.

Toshiba said it can obtain the right against Westinghouse to demand reimbursement of the amount paid by Toshiba, by obtaining funds necessary to offer to make early payment of the parent company guarantee and settling the obligations to creditors.

Further, if the sale of the claims, including reimbursement, against Westinghouse and interests related to Westinghouse is completed by the end of March 2018, Toshiba is expected to be able to reduce the tax impact recorded as a result of the value of the memory business having been determined, and at least approximately 240 billion yen will contribute to further enhancing Toshiba's capital base.

If the Financing successfully completes and the claims against Westinghouse and interests related to Westinghouse are sold, it is expected that 750 billion yen of negative consolidated balance sheet will be remedied as of the end of March 31, 2018 and thereby Toshiba's pressing challenge will be resolved. After the closing of the transfer of the Memory Business, Toshiba will consider appropriate measures to return to shareholders while considering Toshiba group's financial situation, business risks and other factors.

The Financing, full payment of the parent company guarantee, and the sale of the claims against Westinghouse and the interests related to Westinghouse will contribute to improve and strengthen Toshiba's financial situation and enhance its cash balance. The detail of the impact on Toshiba's financial results is under review.

The successful completion of the Financing will remedy a negative consolidated balance sheet and enable Toshiba to avoid the delisting of its shares, both of which have been pressing challenges of Toshiba.

Subsequently, Toshiba group, as the new Toshiba, will focus on four business domains, Social Infrastructure as a core, along with Energy, Electronic Devices and Digital Solutions. Toshiba noted that it will pursue to strengthen its revenue base and achieve stable growth in each business domain and to recover its diminished financial base.