Toshiba goes for unconventional credit line

Dhaka,  Fri,  18 August 2017
Published : 09 Jul 2017, 14:01:04
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Toshiba goes for unconventional credit line

Fears are growing over Toshiba’s ability to secure a quick sale of its prized memory chip business as the crisis-hit conglomerate negotiates an “unconventional” $6 billion credit line with its main lenders, say people briefed on discussions, according to a global media report Sunday.

Rather than using the traditional route of pledging shares as collateral, the new loans will involve Toshiba depositing with its banks a number of share certificates in the chip business, which was spun off this year in preparation for a sale.

The unusual step, which highlights Toshiba’s increasing financial desperation, comes as further blows have landed on a company that some analysts say is at rising risk of bankruptcy. A judgment from the European Court of Justice, announced on Friday, requires Toshiba to pay charges of €56.8 million over violations of competition law in the switchgear, or power generation equipment, market.

Another EU decision on Friday hinted at the potentially massive collateral damage elsewhere in corporate Japan, arising from Toshiba’s financial woes. In 2015, after the company was exposed in a seven-year accounting fraud, it began a rapid jettisoning of prized assets that included selling its profitable medical systems business to Canon.

To book the sale in its 2015 financial year and rapidly shore up its numbers, Toshiba sold the business via a “warehousing” method that involved an interim buyer and would not incur antitrust-related delays.

- SZ
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