As of Morningstar's reporting on Beijing time July 28th, Toshiba’s attempts to raise funds by selling its chip division have come to a halt. Many of Toshiba’s creditors and stakeholders involved in restructuring efforts now see bankruptcy protection as the most viable path for the company’s revival. This viewpoint is shared by those closely involved in Toshiba’s reorganization discussions, including business partners, legal advisors, and representatives from major creditor banks. These individuals argue that bankruptcy protection deserves thorough consideration.
Some participants in these discussions have expressed that filing for bankruptcy protection could be the optimal solution. They plan to propose this strategy during conversations with Toshiba management or its creditors. They assert that bankruptcy protection would buy Toshiba time by delaying immediate repayment of its debts.
Recently, Toshiba CEO Satoshi Tsunakawa stated at a press conference that seeking debt relief via the courts is not under consideration. This week, a spokesperson reiterated that Toshiba has no plans for specific bankruptcy protection filings.
A source close to one of Toshiba’s major creditors likened the company to a cave concealing valuable treasures, yet harboring dangerous pitfalls. Bankruptcy protection, they argued, could eliminate these risks and allow creditors access to the underlying value.
Toshiba’s potential bankruptcy protection filing would represent one of Japan’s largest such cases in history. It could also lead to political complications, particularly in the U.S., where Toshiba owes approximately $3.68 billion to SouthernCo.com regarding an unfinished nuclear project in Georgia. Additionally, Toshiba agreed to pay $2.17 billion to settle Westinghouse’s debt in another U.S. nuclear project with ScanaCorp.
Japanese officials and Toshiba executives are aware that abusing bankruptcy protection could hinder the process. In June, Toshiba estimated its liabilities exceeded its assets by over $5 billion.
The company aims to stabilize its finances by divesting its memory chip business. On June 21st, Toshiba selected a consortium led by a Japanese government-backed investment fund as the preferred buyer for the chip division.
However, recent reports revealed that the consortium’s bid includes SK Hynix equity, complicating Toshiba’s negotiations. This inclusion raises antitrust concerns, and the Japanese government is reluctant to let Toshiba’s technology fall into foreign hands. Furthermore, Western Digital, Toshiba’s chip business partner, filed a lawsuit in California to block the sale, citing rights under their joint venture agreement. Toshiba denies these claims and is actively contesting the suit, which is set for hearing on Friday.
The stalled chip business sale, coupled with the ongoing audit dispute—where auditors refused to approve this year’s financial statements—has eroded creditor confidence. Japan’s top three banks have already made provisions for their Toshiba loans.
Japan experiences significantly fewer bankruptcies annually compared to the U.S., especially among larger firms, partly due to cultural stigma attached to failure.
An insider involved in Toshiba’s recovery efforts noted that while “everyone thinks†bankruptcy protection should be explored, making it public remains challenging.
Two other sources familiar with talks involving a major Toshiba creditor mentioned that even if the chip business sale concludes, Toshiba may still face financial strain.
A Toshiba spokesperson dismissed this concern, stating that selling the chip division at its anticipated price would provide ample funds.
A Japanese government official confirmed that bankruptcy protection remains an option but not the preferred choice, given concerns over commitments to U.S. nuclear projects.
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