Toshiba's Board Approves $5 billion Injection to Stay Listed
Toshiba's board of directors on Sunday approved to proceed with a financing transaction that will inject to the troubled company 5 billion from overseas investors, in order to remain a publicly traded company.
Toshiba expects to close the trancaction on December 5, 2017.
Toshiba will use the funding to offer to make full payment of parent company guarantee related to nuclear power construction project of Westinghouse Electric Company LLC (Westinghouse).
Obtaining funds necessary to offer to make early payment of the parent company guarantee and settling the obligations to creditors, Toshiba hopes that will obtain the right against Westinghouse to demand reimbursement of the amount paid by Toshiba.
Toshiba intends to sell its claims, including reimbursement, against Westinghouse and interests held by it related to Westinghouse to a third party. If such sale is successfully made, Toshiba is expected to be able to significantly reduce its internal resources it had to allocate to the rehabilitation proceedings of Westinghouse and focus its internal resources on its new businesses after the sale of the Memory Business.
In addition to the above, Toshiba is expected to be able to avoid currency fluctuation risk related to the maximum amount of the parent company guarantee specified in US dollar by making full payment of the parent company guarantee.
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 JPY 240 billion 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 JPY 750 billion of negative consolidated balance sheet (i.e., liabilities in excess of assets) 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 said it would consider measures to return to shareholders while considering Toshiba group's financial situation, business risks and other factors.
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.