TOKYO -- Creditors to Toshiba have decided to extend their loan agreement with the company by three months until March 2018 as the risk of default by the troubled electronics maker has declined. Toshiba has raised fresh capital and settled a dispute with its U.S. partner, according to people familiar with the matter.
The loan agreement with seven banks, including Sumitomo Mitsui Banking, Mizuho Bank and Sumitomo Mitsui Trust Bank, was set to expire at the end of 2017.
The lenders welcomed news that Toshiba has raised 600 billion yen ($5.32 billion) of additional capital, and that the company has finally resolved a prolonged dispute with U.S. partner Western Digital over the sale of Toshiba Memory, a key subsidiary.
Under the line of credit, called a "commitment line," Toshiba can draw upon up to 680 billion yen for day-to-day operations and other purposes.
Toshiba had hoped to have the agreement extended for a longer period, but the banks decided on three months, pending completion of Toshiba's planned sale of its memory chip unit by March 2018.
In late September, the banks extended the credit line, which was to expire at the end of the month, until December, after Toshiba decided on a buyer for the memory chip unit. That extension, however, was shortened from the previous term of two years to just three months.
The sale of the memory chip unit will bring in some 2 trillion yen, which will significantly improve Toshiba's finances. Some of the creditor banks are considering cutting the amount of the credit line after the sale.
Toshiba raised the additional 600 billion from 60 overseas investment funds through a third-party share allocation on Dec. 5. The dispute with Western Digital, which had sought to block the unit's sale to a third party, has finally been settled. The remaining hurdle for Toshiba regarding the sale is getting approval from antitrust regulators in China and elsewhere.