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Toshiba is looking to restructure amid massive losses in its nuclear business in the U.S.
Business

S&P downgrades Toshiba even further into junk

Company exploring spin-offs as losses on U.S. nuclear ops could exceed $4.4bn

TOKYO -- S&P Global Ratings has cut Toshiba's credit rating even further into junk status, the ratings agency announced on Tuesday.

The Japanese conglomerate's credit rating was downgraded to CCC+, down one notch from the previous B-. Both ratings are considered "junk" level. S&P said Toshiba's ratings remain on credit watch, with negative implications.

"Today's downgrades and continued CreditWatch placements reflect our view that uncertainties are growing over Toshiba's ability to continue to fulfill its financial commitments in the long term," the ratings agency said in a statement.

It said the decision reflected its view of a growing likelihood that the losses the company will need to recognize related to its U.S. nuclear power business will exceed 500 billion yen ($4.41 billion), "which would inevitably substantially erode its shareholders' equity as of the end of the third quarter (ended Dec. 31, 2016) of fiscal 2016." The Nikkei reported that the losses may reach 700 billion yen.

The embattled Japanese conglomerate is exploring a spin-off of its chip business as well as other restructuring steps. The state-backed Development Bank of Japan is considering buying into the chip business if it is spun off, while other lenders to Toshiba are leaning toward continuing their support until the end of February in the wake of massive impairment charges from the U.S. nuclear business.

The banks will decide on lending beyond that point after scrutinizing the Japanese conglomerate's turnaround plan and financial health.

"We think considerable time will pass before financial institutions put together a framework of support for Toshiba," said S&P. "Any delay in compiling the restructuring plan would further constrain Toshiba's business operations and funding, in our view."

Toshiba on Tuesday said it will announce the amount of goodwill impairment it will suffer related to its U.S. nuclear power business, and the third quarter financial results, on Feb. 14.

Toshiba shares ended Tuesday's trading down 3.38% at 259.80 yen.

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