Toshiba to raise $5.3 billion from new shares to avoid delisting risk

Toshiba to raise $5.3 billion from new shares to avoid delisting risk

The financial difficulties caused by Westinghouse Electric led Toshiba to successively delay the presentation of its financial results, leading the group to be demoted to the second tier of the Tokyo Stock Exchange (TSE) in August.

Embattled conglomerate Toshiba said Sunday it plans to raise $5.3 billion by issuing new shares, a move aimed at avoiding a humiliating delisting from the Tokyo bourse.

Payments from investors for the new shares will be completed on December 5. But potentially lengthy regulatory reviews mean the deal may not close before the end of March. Toshiba is struggling to recover from multibillion-dollar losses in the Westinghouse nuclear operations in the U.S.

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. "But dilution is still something to be reckoned with".

Singapore-based fund Effissimo, established by former colleagues of Japan's most famous activist investor Yoshiaki Murakami, will become the largest shareholder in Toshiba with an 11.34 percent stake.

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The chip deal still faces legal challenges from its chip joint venture partner Western Digital, which argues no deal can proceed without its consent and has sought an injunction through an global arbitration court. The share sale, amounting to roughly half the company's current market value, and tax write-offs would boost Toshiba's assets back above liabilities.

Toshiba agreed in September to sell its prized chip unit to a group led by Bain Capital for $18 billion.

Toshiba posted a negative net worth of ¥552.9 billion at the end of March 2017 due to losses at its USA nuclear operations, an amount expected to grow to ¥750 billion by the end of the fiscal year.

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.

Toshiba intends to sell the claims against Westinghouse to a third party, which would allow it to focus more on its own rehabilitation.

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