Toshiba’s U.S. nuclear power unit, where huge cost overruns have forced the embattled Japanese conglomerate to take a a $6.3 billion writedown, has filed for bankruptcy.
The writedown stemmed from Westinghouse Electric’s AP1000 power plant projects in Georgia and South Carolina. Costs soared due to increased safety demands by U.S. regulators and significantly higher-than-anticipated costs for labor, equipment and components.
“Today, we have taken action to put Westinghouse on a path to resolve our AP1000 financial challenges while protecting our core businesses,” interim CEO José Emeterio Gutiérrez said in announcing Wednesday’s Chapter 11 filing.
“We are focused on developing a plan of reorganization to emerge from Chapter 11 as a stronger company while continuing to be a global nuclear technology leader.”
According to Reuters, the filing will “help keep the crisis-hit parent company afloat as it lines up buyers for its memory chip business.” But as BBC News reports, Toshiba’s “financial problems have some analysts speculating over whether the Japanese conglomerate can even survive the crisis, as it will probably be forced to sell many of its premium segments, such as the lucrative memory chip unit.”
“So while a Westinghouse bankruptcy might stop things from getting even worse for Toshiba, it is still not clear whether the struggling giant will manage to find its feet in time,” BBC News said.
Toshiba had originally hoped to sell its majority stake in Westinghouse. In discussing a possible bankruptcy, Standard & Poors noted earlier this month that “Toshiba is a guarantor for Westinghouse’s external debt and, therefore, we see a growing likelihood that the risk of contingent liabilities will materialize in the future.”
Westinghouse said in a court filing it had secured $800 million in financing from an affiliate of Apollo Global Management to fund its core businesses during the reorganization. Citing people familiar with the matter, Reuters said the money cannot be used to repay the liabilities related to cost overruns at the power plants.
“Westinghouse’s nuclear services business is expected to continue to perform profitably over the course of the bankruptcy and eventually be sold by Toshiba,” Reuters said.