Toshiba Corp’s nuclear unit in the U.S., Westinghouse, filed Chapter 11 bankruptcy protection on Wednesday, as its parent based in Japan looks to limit losses that could threaten the future of the company.
The Chapter 11 filing will allow Westinghouse, based in Pittsburgh, whose projects building nuclear plants have experienced delays and overruns in cost, to break or renegotiate construction contracts, though the utilities owning the project likely would seek damages.
Toshiba, the goal is mitigating growing liabilities that stem from guarantees that it provided. The Japanese based company said Westinghouse liabilities were over $9.8 billion at the end of 2016, which was more than an estimate from earlier of close to $6.3 billion.
Because of that, the industrial conglomerate announced that it might book a loss of over 1 trillion yen equal to $9 billion for the year that ends this month, which is up from a forecast earlier of a 390 billion yen loss.
This move will trigger a number of complex negotiations involving the conglomerate based in Japan, its unit in the U.S. and a number of creditors. It could also embroil the governments of both the U.S. and Japan given the scale of this collapse and the loan guarantees the U.S. government has for new nuclear reactors.
Westinghouse said it secured financing of $800 million to fund as well as protect core businesses during the reorganization.
Toshiba said through a prepared statement it was guaranteeing as much as $200 million of Westinghouse’s financing and added that the unit would be taken out of its consolidated books at the end of March.
Westinghouse has nuclear plant projects in different stages of development in China, the United Kingdom and India. The company announced there would be no impact to its operations in Europe, Asia and the Middle East.
Japan fears a collapse by Westinghouse would create criticism from the U.S. President over its impact that it would have on jobs as well as finances as the costs of a bankruptcy would be borne by taxpayers in the U.S. for two power plant projects in South Carolina and Georgia.
The government in the U.S. granted guarantees on loans that total over $8.3 billion to the utilities that commissioned the project in Georgia.
A spokesperson for the government of Japan said the governments of Japan and the U.S. were having discussions related to the issue.
George Westinghouse an American inventor and engineer founded the company in 1886. It currently has 12,000 employees worldwide.