Unit's Woes Stun Toshiba Toshiba Missed Unit Woes -- WSJ
June 09 2017 - 03:02AM
Dow Jones News
Trouble at U.S. nuclear arm Westinghouse seems to have surprised
its parent, court records indicate
By Kosaku Narioka
TOKYO -- Toshiba Corp. didn't know its U.S. nuclear subsidiary
was preparing for a bankruptcy filing even after the unit had hired
lawyers for the task, according to court records and Toshiba's
In a Nov. 30, 2016, letter, a lawyer at New York firm Weil,
Gotshal & Manges LLP wrote that Toshiba unit Westinghouse
Electric Co. had engaged the firm to work on "the potential filing
and administration of a chapter 11 proceeding under the United
States Bankruptcy Code."
A Toshiba spokesman, reiterating earlier statements by company
executives, said this week that no one at Tokyo headquarters was
aware of the potential for major losses or bankruptcy at
Westinghouse until early December 2016. Toshiba Chief Executive
Satoshi Tsunakawa learned of the problem in mid-December, the
At a news conference on Dec. 27, Mr. Tsunakawa said Toshiba was
facing a multibillion-dollar loss in connection with cost overruns
at Westinghouse nuclear projects in the U.S. but didn't discuss a
If Toshiba's timeline is accurate, it suggests poor
communication between parent and subsidiary contributed to letting
the problems at Westinghouse get out of hand. Toshiba, one of
Japan's biggest and oldest conglomerates, has said it has doubts
whether it is a going concern because of its unit's bankruptcy.
Conversely, if Toshiba did know about the unit's bankruptcy
plans ahead of time but failed to disclose them promptly, it could
worsen trust among investors at a time when stock-exchange
officials in Tokyo are weighing whether to delist Toshiba
Cost overruns and delays have long plagued nuclear-reactor
projects undertaken by Westinghouse in Georgia and South Carolina.
Some analysts had speculated for years that Toshiba might take a
large hit on its Westinghouse holding. The Japanese company
announced a write-down of some Westinghouse goodwill in April 2016
but maintained the nuclear unit had a bright future until revealing
the larger losses at the Dec. 27 news conference.
The Toshiba spokesman said the company began to consider a
bankruptcy filing by its U.S. subsidiary around the time of that
news conference -- about a month after the U.S. unit had already
hired lawyers to prepare the filing.
Westinghouse filed for protection from creditors under chapter
11 on March 29. Toshiba, which owned 87% of Westinghouse at that
point, has estimated that Westinghouse-related write-downs led to a
loss of Yen950 billion ($8.65 billion) in the year ended March 31,
A Westinghouse spokeswoman declined to comment. Lawyers at Weil
Gotshal didn't respond to requests for comment.
The November letter was part of court records released in April,
but it didn't get wide notice at the time.
In 2016 and early 2017, a key executive on the nuclear issue was
Shigenori Shiga, who was chairman of Toshiba and long responsible
for the company's energy business including Westinghouse, where he
had earlier served as chairman of the board.
Toshiba's account suggests either that Mr. Shiga didn't know
Westinghouse had hired lawyers for a possible bankruptcy filing or,
if he did know, that he didn't immediately convey news of the
preparations to board colleagues in Tokyo including Toshiba's CEO.
Toshiba declined to make Mr. Shiga available for comment and he
couldn't be located.
Toshiba didn't get its auditor's approval for October-December
2016 quarterly results and has yet to release audited results for
the full fiscal year ended March 2017, citing a dispute with its
auditor over whether its internal controls were adequate in
accounting for Westinghouse.
A self-regulatory body at Japan Exchange Group Inc., which
operates the Tokyo Stock Exchange, is reviewing Toshiba's status
for possible delisting after a previous accounting scandal.
Naoki Fujiwara, a fund manager at Shinkin Asset Management, said
any evidence that Toshiba knew about Westinghouse's problems
earlier than it has acknowledged "would give a bad impression in
terms of appropriate disclosure" and could affect the exchange's
review. Others said Toshiba's reputation was already tarnished and
its listing was being kept alive by political considerations such
as the company's large workforce in Japan.
An exchange spokesman declined to discuss specific issues in the
review but said outside influences wouldn't affect the outcome.
--Takashi Mochizuki, Russell Gold and Peg Brickley contributed
to this article.
Write to Kosaku Narioka at firstname.lastname@example.org
(END) Dow Jones Newswires
June 09, 2017 02:47 ET (06:47 GMT)
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