Toshiba Seeks to Raise $5.4 Billion to Avoid Delisting

(Bloomberg) -- Toshiba Corp. plans to raise 600 billion yen ($5.4 billion) by selling new shares and will explore divestment of its Westinghouse-related assets in a bid to avoid being delisted from the Tokyo Stock Exchange.

Toshiba’s board approved the transaction on Sunday and expects it to close by Dec. 5, the Tokyo-based company said in a statement. It will sell 2.28 billion new shares at 262.8 yen per share, about 10 percent less than Friday’s closing price, it said in a separate statement in Japanese. Toshiba shares fell as much as 5.1 percent in Tokyo trading.

If the transactions are successful, Toshiba expects the consolidated negative 750 billion yen on its balance sheet will be erased by the end of the fiscal year in March. About 60 funds, including Effissimo Capital Management PTE and David Einhorn’s Greenlight Capital, are planning to make investments, it said.

Toshiba is struggling to recover from multibillion-dollar losses in the Westinghouse nuclear operations in the U.S. The company has agreed to sell its memory-chip unit to raise funds, but feared the deal wouldn’t be completed by the end of March as it needs to clear competition laws in different countries. Toshiba needs to reverse its negative shareholders equity by the end of its fiscal year to avoid violating the TSE’s listing requirements.

“Eliminating excessive debt and bolstering capital can certainly be seen in a positive light,” said Masahiko Ishino, an analyst at Tokai Tokyo Securities. “But dilution is still something to be reckoned with.”

Toshiba is selling its memory chip unit to a consortium led by Bain Capital. The sale has been complicated by legal action from Western Digital Corp., which has argued it should have veto rights because of its partnership with Toshiba. The U.S. company has filed for arbitration to resolve the dispute, a process that may drag out and complicate the closing.

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Private equity firms Blackstone Group LP and Apollo Global Management LLC have teamed up to bid on Toshiba’s Westinghouse unit and others are considering offers, people familiar with the situation said in September. The nuclear unit, which was contracted to build two power projects in the U.S. that were both billions of dollars over budget and years behind schedule, filed for bankruptcy in March.

Selling its holding in the nuclear-power business Westinghouse, and any liability for claims, will let Toshiba “significantly reduce” resources required to rehabilitate that unit, funds that can be focused on new businesses, the company said in the statement Sunday.

Toshiba aims to use the capital it gains from the share sale for a full payment of so-called "parent-company guarantees" related to its Westinghouse unit, according to the statement. If Toshiba settles obligations to Westinghouse creditors, it will then be able to request reimbursement from the U.S.-based reactor-maker. Toshiba will then sell the claims against Westinghouse and focus on rebuilding its remaining business units.

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