Japan’s Toshiba Corp has agreed to sell claims in its US-based nuclear subsidiary, Westinghouse Electric Company, to bolster its capital by JPY410bn ($3.68bn) by March, to help to erase negative shareholder equity and avoid being delisted. Toshiba plans to complete the sale of the claims to Nucleus Acquisition, an entity controlled by the Baupost Group, this month, it said in a statement. The deal will generate an after-tax profit of JPY170bn.
The sale will end the difficulties Toshiba faced in the wake of Westinghouse’s bankruptcy filing in March 2017, which related to its US operations, including projects to construct four AP1000 reactors at two projects, Vogtle in Georgia, and VC Summer in South Carolina. The resulting losses had pushed Toshiba’s liabilities beyond its level of assets, threatening its listing on the Tokyo Stock Exchange. Toshiba also put its semiconductor business up for sale to plug the hole in its balance sheet.
The nuclear asset sale along with JPY600bn raised in December through a new share issue will resolve its capital shortage by the end of its fiscal year, Toshiba said in the statement. Over the past two months, Toshiba has paid its guarantees on the Westinghouse projects in South Carolina and Georgia, entitling it to a total of about $8.1bn in claims against Westinghouse and Brookfield, which is buying the Westinghouse-related shares that it holds. Toshiba said it has entered into an assignment and purchase agreement with Nucleus and a share purchase agreement with Brookfield.
Under the terms of the agreements, Toshiba will sell its rights to assert claims against Westinghouse related to the parent guarantees for $5.788bn, and on account of other claims, Toshiba holds against Westinghouse for $2.284bn to Nucleus, for the sale price of $2.160bn.
On 4 January, it was announced that Brookfield Business Partners, together with institutional partners - collectively known as Brookfield - had agreed to acquire 100% of Westinghouse from Toshiba for about $4.6bn. Toshiba has now signed a share purchase agreement under which it will sell to Brookfield all shares it holds in Westinghouse-related assets - Toshiba Nuclear Energy Holdings (US) Inc and Toshiba Nuclear Energy Holdings (UK) Limited – for $1. The acquisition is expected to close in the third quarter of 2018, subject to bankruptcy court approval and other conditions including regulatory approvals.
Toshiba said it has also entered into a Plan Support Agreement with key stakeholders in Westinghouse's Chapter 11 reorganisation proceedings, including Westinghouse, the Statutory Committee of Unsecured Creditors, Brookfield and Nucleus. The stakeholders agreed to support the reorganisation plan and the acquisition of Westinghouse by Brookfield. Toshiba's equity interests will be subordinated to payment of all other Westinghouse claims in the proceedings.