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Toshiba’s nuclear power-related debts grow – hasty effort to sell part of its core business

scrutiny-on-costsAnalysis – As nuclear loss grows, Toshiba needs chip investors, soon Reuters By Makiko Yamazaki and Kentaro Hamada 22 JAN 17  TOKYO

With mounting writedowns from its nuclear business, Japan’s Toshiba Corp (6502.T) is looking to sell part of its core semiconductors business, a world No.2 in the flash memory chips used in smartphones.

But its rush to plug a hole in its U.S. nuclear business that Japanese media now estimate at as much as $6 billion may complicate any asset sale.

Toshiba, which warned last month of multi-billion dollar charges for U.S. nuclear project cost overruns, wants to boost its capital base by the end of the financial year in March.

Failure to offset the nuclear hit could wipe out already thin shareholder equity and push the company into negative net worth – jeopardising its role in public infrastructure projects and its place on the Tokyo Stock Exchange’s ‘first section’, for larger companies.

Following a 2015 accounting scandal, the conglomerate is barred from raising fresh funding on equity markets. Selling assets, though, could help it win broader financial support from its main banks.

Toshiba could sell 20-30 percent of its chip business, according to media reports.

The business, worth more than $10 billion, is the world’s second largest after Samsung Electronics (005930.KS) in flash memory chips – and it’s Toshiba’s most profitable.

Operating profit is forecast at 130 billion yen (913.35 million pounds) for the year to end-March, accounting for the bulk of overall group profit, forecast at 180 billion yen. Those forecasts were made before its December warning of the U.S. nuclear charges.

People with knowledge of the matter said Toshiba has begun preparations to sell a minority stake in its chip business. One person said non-disclosure agreement forms have been sent to some private equity funds……..

As Toshiba has ruled out ceding control of the chips business, it may also seek state help, as other troubled Japanese technology companies have done in previous restructurings, the sources said.

Another person familiar with the matter said the state-run Development Bank of Japan is among several funds Toshiba may approach for possible investment in its chip business, though the bank could be put off by the size of investment needed.

(Reporting by Makiko Yamazaki and Kentaro Hamada; Writing by Miyoung Kim; Editing by Ian Geoghegan) http://uk.reuters.com/article/uk-toshiba-accounting-semiconductors-ana-idUKKBN156009

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January 23, 2017 - Posted by | business and costs, Japan

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