Toshiba’s Westinghouse calls in US bankruptcy lawyers
The move comes after a US$6.3 billion writedown at Westinghouse last month wiped out Toshiba's shareholder equity
Westinghouse Electric Co LLC, the US nuclear power plant developer owned by troubled Japanese electronics giant Toshiba Corp , has brought in bankruptcy attorneys from law firm Weil Gotshal & Manges LLP, people familiar with the matter said on Wednesday.
The move comes after a $6.3 billion writedown at Westinghouse last month wiped out Toshiba’s shareholder equity and caused it to seek divestments to create a buffer for any fresh financial problems.
A Chapter 11 bankruptcy filing by Westinghouse in the United States could help limit Toshiba’s losses, two people said, cautioning that the retainment of the debt restructuring lawyers from Weil is just an exploratory step, and that no decision about a bankruptcy filing had yet been taken.
A Westinghouse spokeswoman declined to comment on Weil’s role, but said that Westinghouse has hired Lisa Donahue of advisory firm AlixPartners LLP as its chief transition and development officer, to lead “an operational restructuring and financial rebuilding.”
Toshiba said it is not aware of any intention for Westinghouse to file for Chapter 11 bankruptcy.
AlixPartners declined to comment, while Weil did not respond to a request for comment.
Donahue last ran restructuring efforts at debt-laden Puerto Rico utility Puerto Rico Electric Power Authority. Westinghouse already has a working relationship with Weil, having tapped it as legal adviser last year on its acquisition of engineering services firm CB&I Stone & Webster Inc from Chicago Bridge & Iron Company NV (CB&I) .
Toshiba last week asked a Japanese law firm to help estimate the potential financial impact it would face if Westinghouse files for Chapter 11 bankruptcy, sources told Reuters at the time.
Westinghouse is overseeing the construction of four nuclear power plants in South Carolina and Georgia, the first to be built in the United States in more than 30 years. However, these projects, owned by US utility companies Scana Corp and Georgia Power Co, respectively, have been plagued by cost overruns and delays.
The plants were first approved by regulators in 2012, but they required changes to the plans so that they could withstand the impact of a commercial aircraft in a possible hijacking.
“While we cannot speculate on what may happen in the future with Toshiba or Westinghouse and their overall business, we will continue to hold them, as the contractor for the Vogtle project, accountable for their responsibilities under our agreement. Progress at the Vogtle site is happening today and will continue in the future,” a Georgia Power spokesman said on Wednesday, referring to the Georgia project.
Scana said in February that Toshiba and Westinghouse are committed to finishing the plants, and will have them in service by 2020.
Adding to the woes of Pittsburgh-based Westinghouse, which was acquired by Toshiba in 2006 for $5.4 billion, is its legal row with CB&I. CB&I has argued in court that it expected a relatively small payment from Westinghouse of only $161 million when the Stone & Webster deal closed, on the understanding that the latter was taking on a challenged business.
However, Westinghouse has said that it is actually owed $2 billion by CB&I.