Toshiba offers chip unit shares as loan collateral
Ailing giant scrambles for financial backing
TOKYO -- Toshiba asked creditors Wednesday to extend loans until the end of April by offering shares of its memory chip unit and other assets as collateral, seeking continued support as it deals with the fallout from crippling nuclear-related losses.
The shares in Toshiba Memory, the entity to be created by the April 1 spinoff of chip operations, would be used to secure a short-term credit line from seven key lenders, among them Sumitomo Mitsui Banking Corp., Mizuho Bank and Sumitomo Mitsui Trust Bank. The conglomerate also offered to put up commercial real estate as well as roughly 200 billion yen ($1.74 billion) of stocks in listed companies as collateral for syndicated financing extended by these lenders and others.
The proposals were put forth at a briefing for creditors. Toshiba requested a decision on the collateral by March 24 and on the syndicated-loan extensions by March 30.
The conglomerate explained the circumstances behind the second postponement of April-December earnings results and said it should have no funding problems next quarter. Though main lenders indicated that they would continue to support the company, some regional banks and other creditors are less keen.
Toshiba shares plunged 14% to 186.5 yen on Wednesday, their lowest point during regular trading hours for about three weeks, before closing at 189.5 yen. They topped the turnover ranking for the first section of the Tokyo Stock Exchange, mainly because of profit-taking.
The shares look likely to keep gyrating. The TSE put Toshiba on a watch list Wednesday for securities whose listing status is under review. The company, which was designated a "security on alert" in 2015 in the wake of an accounting scandal, submitted a report on internal controls Wednesday and faces delisting if the bourse does not see sufficient improvement.
Toshiba's fragile financial foundation and repeated earnings delays are cause for concern among investors. "The risk of delisting is higher than before," said Tomoichiro Kubota of Matsui Securities.
The company's credit rating has also plummeted since the accounting scandal, which typically means less favorable financing terms.
Toshiba must get to a point where there is no danger of further losses and "make a fresh start," said Akio Mimura, chairman of the Japan Chamber of Commerce and Industry.