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Toshiba's nuclear unit files for bankruptcy, 1 tril. yen loss eyed

Toshiba Corp. said Wednesday its troubled U.S. nuclear unit
Westinghouse Electric Co. has filed for Chapter 11 and it could post
a net loss of over 1 trillion yen, the biggest ever for a Japanese
manufacturer.

Westinghouse filed for bankruptcy protection in the U.S.
Bankruptcy Court for the Southern District of New York, as the
Japanese parent company was rushing to limit further losses from the
U.S. unit and looking to exit the money-losing overseas nuclear
business.

With the do-or-die decision on the filing, Toshiba will make
all-out efforts to move out of its financial woes, Toshiba President
Satoshi Tsunakawa told a press conference in Tokyo after Westinghouse
filed for bankruptcy.

"We are almost risk-free as we are pulling out of overseas
nuclear operations, the biggest problem," he said.

Toshiba said it could post a group net loss of 1.01 trillion yen
($9.13 billion) for the fiscal year ending on Friday, with massive
costs related to the Chapter 11 filing. Westinghouse has $9.8 billion
in total liabilities, much of which must be shouldered by Toshiba
under a debt guarantee for the U.S. unit.

The estimated net loss would eclipse 787.3 billion yen posted by
Hitachi Ltd. in the year to March 2009 following the 2008 global
financial crisis and would be much worse than the 390 billion yen
loss the company projected in February.

But Tsunakawa said he expects no more additional losses from the
U.S. nuclear business.

The huge loss would put the company in a negative net worth of
620 billion yen at the end of March, Toshiba said, far larger than
the 150 billion yen it previously estimated.

Tsunakawa said that he feels responsibility for the company's
crisis but has no intention to step down as chief executive.

He took the helm at the company last June after it had been hit
by an accounting scandal in 2015.

The bankruptcy filing will deconsolidate Westinghouse from
Toshiba's financial results for the current fiscal year.

The company has been under pressure to have Westinghouse file
for bankruptcy protection, as the unit is the main cause of its
massive losses with delays in U.S. plant projects leading to cost
overruns, informed sources have said.

The nuclear-to-electronics conglomerate was looking to finalize
losses related to the unit within the current fiscal year through the
bankruptcy filing.

In February, Toshiba said it was expecting a loss of 712.5
billion yen in its U.S. nuclear business for the nine months through
December on an unaudited basis. The company had to delay its earnings
announcement twice, saying it needed more time to look into an
accounting problem at Westinghouse.

Faced with ballooning losses, Toshiba had been considering a way
to separate itself from the debacle at Westinghouse, which it bought
in 2006 as a step to tap into overseas markets.

The cash-strapped company has decided to spin off its prized
memory chip business and sell a majority stake, or even the whole
operation, to raise funds to bolster its financial standing.

Toshiba closed the first round of bids Wednesday for the new
semiconductor division that it plans to establish on Saturday.

Tsunakawa is confident that the bidders have a strong financial
standing and the proceeds from the sale will be able to eliminate the
company's liabilities.

He estimates the value of the chip business at 2 trillion yen at
least, and said he expects the value to continue to rise.

Toshiba has likely attracted 10 bidders with one of them
offering more than 2 trillion yen, according to sources close to the
matter.

The company will choose the preferred buyer in May.

Toshiba is seeking support from Korea Electric Power Corp. as a
sponsor, aiming to sell its Westinghouse shares to the South Korean
utility.

"We are focused on developing a plan of reorganization to emerge
from Chapter 11 as a stronger company while continuing to be a global
nuclear technology leader," Westinghouse Interim President and Chief
Executive Officer Jose Emeterio Gutierrez said in a release.

The company turned the corner in stemming the bleeding for the
time being. But the fate of its turnaround remains unclear.

The sale of Westinghouse and the pullout of the overseas nuclear
business will leave the company with no core profit-making businesses
after it sold its cash-cow medical business and as it plans to sell
its chip operation.

The outlook for the sale of the U.S. unit is far from certain.
Toshiba may find it difficult to attract a buyer with slowing demand
for nuclear power generation after the 2011 Fukushima nuclear crisis.
(March 29)