Toshiba Corp. has entered final preparations for its ailing U.S. nuclear unit Westinghouse Electric Corp. to apply for Chapter 11 bankruptcy this month, it has been learned.
Through the bankruptcy filing, Toshiba aims to curb further financial damage from its involvement in the nuclear industry in the U.S., settling its losses within the fiscal year ending in March as it hurries to financially reconstruct itself.
Westinghouse is constructing four nuclear reactors in the U.S., but construction delays and other factors have caused huge losses. Under its contracts, Westinghouse is obligated to cover the extra construction costs, but applying for bankruptcy protection could allow these contracts to be severed.
Toshiba plans to sell its majority stake in Westinghouse in fiscal 2017 to remove the unit from consolidated financial statements. If losses can be stemmed through application of the bankruptcy law, this will also make it easier for Toshiba to unload its shares in the nuclear power company. Some of Toshiba's main banks have also called for it to finalize its Westinghouse-related losses before the end of March.
The U.S. federal and local governments appear to have expressed concern that bankruptcy proceedings could halt nuclear plant construction and eliminate jobs. Toshiba, however, hopes to win understanding for its plans by pointing out that Chapter 11 bankruptcy allows companies to work on projects while reducing debts and explaining that plants under construction and employment would not be affected.
Westinghouse's bankruptcy filing could be delayed until April, but Toshiba would then want to have it done by April 11, the deadline for announcing its financial status for April-December 2016.
Toshiba bought Westinghouse in 2006 for some 600 billion yen. Westinghouse became one of Toshiba's main projects, but at the end of 2016 it announced the nuclear unit had suffered major losses. Toshiba President Satoshi Tsunakawa admitted at a news conference on March 14 this year that having Westinghouse apply for bankruptcy was an "option."