Westinghouse has filed for Chapter 11 bankruptcy protection as its Japanese owner Toshiba seeks to exit a deeply troubled US nuclear business that has pushed the group to the edge of financial collapse.
The filing on Wednesday followed rushed talks between Toshiba, its lenders and creditors of Westinghouse as the Japanese group scrambles to offload the subsidiary before the end of its fiscal year on March 31.
Toshiba is wrestling with a $6.3bn writedown on its US nuclear business, the rising risk of share delisting at home, and a breakup of its businesses that could lead to the sale of its valuable flash memory business.
The demise of Westinghouse, a storied US industrial name founded by inventor George Westinghouse in 1886, has been caused by spiraling overruns at nuclear power plants in South Carolina and Georgia, which are now estimated to cost $11bn more than originally budgeted.
In a statement, the company said it had obtained $800m in debtor-in-possession financing from a third-party lender to support the operation of its nuclear power plants during the restructuring phase.
“We are focused on developing a plan of reorganisation to emerge from Chapter 11 as a stronger company while continuing to be a global nuclear technology leader,” said José Emeterio Gutiérrez, interim chief executive of the Pittsburgh-based company.
Shares in Toshiba closed up 1 per cent at ¥219.40, but shares are down 53 per cent since mid-December when the scale of Westinghouse’s troubles was first disclosed.
Analysts say the planned bankruptcy and sale of Westinghouse, which owns reactor technologies used in nuclear-powered US aircraft carriers and submarines, is fraught with complications that could extend beyond Toshiba to government relations between Japan and the US.
For Toshiba, the uncertainty over the true nature of the financial troubles at Westinghouse has caused the Japanese group to twice delay the release of its audited results for the fiscal third quarter of last year, threatening its status as a listed company.
Investors say that even if it manages to sell Westinghouse, Toshiba’s problems are unlikely to be solved. The Tokyo Stock Exchange is screening the company for weak internal controls, which were revealed in a $1.3bn accounting scandal two years ago.
Its governance structure came under fresh scrutiny after Toshiba said this month that its audit committee had found evidence, based on an investigation by lawyers, that some senior Westinghouse manages exerted “undue pressure” over the acquisition of a US nuclear construction company in 2015.