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Toshiba mulling 600 billion yen capital injection as backup for clearing debts

The headquarters of Toshiba Corp. is pictured from a Mainichi Shimbun helicopter in Tokyo's Minato Ward in this July 21, 2015 file photo. (Mainichi)

Struggling electronics giant Toshiba Corp. is considering raising capital in the region of 600 billion yen (about $5.28 billion) to assist with its business turnaround, it has been learned.

The proposed capital would act as financial backup in the event that the firm fails to clear its excessive debts through selling its lucrative semiconductor unit by the end of March 2018.

Toshiba is speaking to companies such as brokerages, with the view to selecting third-party allocation of shares as a possible means of raising the capital.

If the electronics company fails to clear its excessive debts by the end of March 2018, its shares will be delisted from the Tokyo Stock Exchange. Although there are still a few more months until the deadline, it is uncertain whether the firm will be able to clear the various antitrust law screening processes of related countries that are needed to sell its semiconductor unit in time. Therefore, the company is hurriedly looking into the capital injection plan as a possible alternative method of clearing its debts.

Companies can raise funds by issuing new shares to shareholders through public stock offerings, and the third-party allocation of shares to specific, trusted investors that have a strong connection with them. However, given that the option of public stock offerings would probably be difficult in practice for Toshiba, it is likely that the firm will go for the third-party allocation of shares instead.

According to a source close to the company, Toshiba's main lenders have said that selling the semiconductor unit is a requirement for them to keep investing, and Toshiba will go ahead with the sale of the unit as planned, regardless of the capital injection plan.

Commenting on the situation at a press conference on Nov. 9, Toshiba Chief Financial Officer Masayoshi Hirata said, "We don't think we would fail to sell the semiconductor unit (by being unable to clear the antitrust law screening processes in time). However, we are thinking of a backup plan just in case the sale isn't completed by March 2018."

Toshiba is also considering selling some of its bonds just in case a part of the excessive debts remain even after the semiconductor unit is sold off. In the meantime, Toshiba could raise the capital increase amount to further restore the company's future financial health.

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