Business Technology

Monday 25 September 2017

Toshiba looking for additional €2.3bn as scandal costs mount

Masashi Muromachi, who took over as Toshiba president this year, bows during a news conference in Tokyo last week. Photo: Bloomberg
Masashi Muromachi, who took over as Toshiba president this year, bows during a news conference in Tokyo last week. Photo: Bloomberg

Pavel Alpeyev and Takashi Amano

Toshiba is seeking its second credit line from banks in three months, aiming to gain access to an additional 300 billion yen (€2.3bn) as it faces mounting costs from an accounting scandal that has led to layoffs and asset sales.

The company plans to apply for funds by the end of January, a spokeswoman said.

Combined with the 400 billion yen credit line Toshiba received in September, that would bring Toshiba's total loan facility to more than one trillion yen.

Toshiba, which last week forecast a record 550 billion yen annual loss, needs money to pay for thousands of job cuts and the overhaul of the businesses that make televisions and PCs.

President Masashi Muromachi, who took over this year to clean up after an accounting scandal that has wiped about $8bn in market value, has said there will be no public fundraising for two years.

The shares gained 2.7pc to close at 232.1 yen in Tokyo while the benchmark Topix index was little changed. The stock has slumped 55pc this year as the company withdrew its earnings forecast in May and announced an accounting probe that was later expanded. Moody's cut its credit rating on the company two levels to junk earlier this month and the Tokyo Stock Exchange has placed Toshiba stocks in a special "watch" category to see whether it can improve internal controls.

Both moves have made it harder for the company to raise funding through debt or new shares.

The spread on Toshiba's bonds due in 2020 jumped 100-fold this year to 311 basis points, reflecting the risk premium investors demand over the yen swap rate. The company hasn't sold debt since July 2014.

Sumitomo Mitsui Banking, Mizuho Bank and Sumitomo Mitsui Trust Bank provided the credit line in September. A spokeswoman declined to give names of lenders for the current round of financing.

The company said last week it would slash 6,800 consumer electronics jobs, taking total cuts beyond 10,000, including previously announced plans, as the sprawling conglomerate focuses on chips and nuclear energy.

Toshiba confirmed in August that it overstated profits going back to fiscal 2008/09 by 155 billion yen. It also reported a 37.8 billion yen net loss for the last financial year to reflect more costs and conservative estimates on operations.

An independent accounting probe said in July that the company suffered from dysfunction in governance and a culture of discouraging employees from questioning their superiors.

Analysts have said restructuring was long overdue.

The company launched the world's first mass-market laptop in 1985 but has seen its consumer electronics business dwindle amid price competition with Asian rivals. (Bloomberg and Reuters)

Irish Independent

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