According to Morningstar Beijing time on July 28th, as the efforts to raise funds through the sale of the chip business unit stopped, many creditors and Toshiba restructured stakeholders believe that the application for bankruptcy protection is the best way for Toshiba to revive. The people involved in the discussion of Toshiba’s reorganization — including business partners, lawyers, and people associated with major creditor banks — claim bankruptcy protection deserves high-fidelity research.
Some of them said that filing for bankruptcy protection is the best option. They will recommend this scheme when discussing related issues with Toshiba or creditors. They said that applying for bankruptcy protection would prevent Toshiba from having to repay the due debts immediately.
Toshiba CEO Satoshi Tsunakawa recently stated at a press conference that seeking debt relief through the court is not an option. Toshiba spokesman reiterated this week that the company did not seek "specific plans" for bankruptcy protection.
A person familiar with the situation discussed by one of Toshiba’s major creditors compared Toshiba to a cave and hidden treasures in caves, but there were also poisonous snakes. Applying for bankruptcy protection can kill vipers and allow creditors to get treasure.
Toshiba’s application for bankruptcy protection will be one of the largest bankruptcy protection cases in Japan’s history, and it will have some drawbacks, including the possible political disturbance in the United States. Toshiba promised to pay US$3.68 billion to US nuclear plant operator SouthernCo.com to repay Westinghouse’s debt in an unfinished project in Georgia. On Thursday, Toshiba reached an agreement with ScanaCorp. and a partner to pay US$2.17 billion to repay Westinghouse’s debt in the second unfinished US nuclear power project.
People involved in the discussions stated that Japanese government officials and Toshiba executives knew that the abuse of bankruptcy protection might prevent Toshiba from applying for bankruptcy protection.
Toshiba estimated in June that debt as of March 31 was more than $5 billion higher than assets.
Toshiba has stated that it plans to restore financial health by selling its memory chip business. On June 21st, Toshiba appointed a consortium led by an investment fund with a Japanese government background as the preferred bidder for the memory chip business.
However, since the Wall Street Journal reported earlier this month that the consortium’s offer contained SKHynix’s equity, Toshiba’s negotiations to sell the memory chip business unit were in trouble. SKHynix's participation will raise antitrust concerns and the Japanese government should not let Toshiba's technology fall into the hands of foreign companies. In addition, Toshiba’s chip business partner, Western Digital, filed a lawsuit in California to stop Toshiba’s sale of the chip business, claiming that the joint venture agreement with Toshiba gave it the right to vote on the sale of the chip business. Toshiba has denied the Western Digital's claim and is actively responding to it. The case is scheduled to be heard on Friday.
The sale of the memory chip business stalled, and the stalemate between Toshiba and the auditing agency – the auditor’s refusal to approve this year’s financial report eroded creditors’ trust. The three largest banks in Japan have already made provision for their Toshiba debt.
Japan's annual bankruptcy is far less than that of the United States, especially large companies, partly because bankruptcy is considered shameful.
A person who directly participated in Toshiba's partial recovery program stated that "everyone thinks" must consider applying for bankruptcy protection, but it is very difficult to make it publicly.
Two other people who understood the discussions with a major Toshiba creditor said that even if the sale of the memory chip business is completed, Toshiba may still be “tightâ€.
A Toshiba spokesman refuted this view, saying that if the company sells the chip business unit at the current expected price, "we believe we can get sufficient funds."
An official of the Japanese government stated that Toshiba’s application for bankruptcy protection is an option, but it is not the preferred option because the Japanese government is concerned about the violation of its commitment to nuclear power projects in the United States.
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