TOKYO Toshiba Corp’s (6502.T) U.S. nuclear unit Westinghouse filed for Chapter 11 protection from creditors on Wednesday, just three months after huge cost overruns were flagged, as the Japanese parent seeks to limit losses that threaten its future.
Bankruptcy will allow Pittsburgh-based Westinghouse, once central to Toshiba’s diversification push, to renegotiate or even break its construction contracts, though the utilities that own the projects could seek damages. It could even pave the way for a sale of all or part of the business.
For Toshiba, the aim is to fence off soaring liabilities and keep the group afloat. Toshiba said Westinghouse-related liabilities totaled $9.8 billion as of December, making it one of the industry’s most costly collapses to date; it had earlier estimated writedowns would swell to $6.3 billion.
Toshiba said that as a result it expected to book a net loss of 1 trillion yen ($9 billion) for the year ending in March, up from an earlier loss forecast of 390 billion and one of the biggest annual losses for a Japanese company ever.
Westinghouse’s bankruptcy, the latest financial debacle to buffet corporate Japan, comes on top of a separate 2015 accounting scandal for Toshiba. To cover upcoming losses, it has put its prized memory chip unit up for sale.
“Toshiba concluded that a Chapter 11 filing was essential to rebuild Westinghouse,” Toshiba CEO Satoshi Tsunakawa said at a news briefing in Tokyo.
The filing will now trigger complex negotiations between the Japanese conglomerate, its unit and creditors, and could embroil the U.S. and Japanese governments, given the scale of the collapse and U.S. government loan guarantees for new reactors.
Westinghouse said it has secured $800 million in financing to fund and protect core businesses during its reorganization.
Toshiba, whose shares have crashed as the nuclear problems surfaced, said it would guarantee up to $200 million of the…