Toshiba Deal Battles Uncertainty As Preferred Bidder Fails To Reach Agreement With Lenders

  • The chances of Toshiba Corp's TOSYY preferred bidder securing letters of commitment from banks are unlikely by year-end as disputes over lending terms persist after months of negotiations.
  • A consortium led by Japan Industrial Partners Inc explored bank financing totaling ¥1.4 trillion ($10.6 billion) to take Toshiba private. However, negotiations have stalled over covenants and collateral, Bloomberg reports.
  • JIP has also requested additional subordinated loans and other forms of mezzanine capital, with talks still ongoing.
  • Banks, including Sumitomo Mitsui Banking Corp, had expected to sign off by end-December on ¥1.2 trillion in syndicated loans to help finance the buyout deal and another ¥200 billion to cover operational costs. No financing commitment is now possible until the new year.
  • The buyout deal will likely be worth ¥2.2 trillion. JIP plans to decide on an offer price once it secures commitment letters. 
  • Toshiba may hold a special committee meeting in mid-January to discuss JIP's offer.
  • Japan's iconic brand, sullied by years of scandals and rising financing costs, had difficulty securing bank financing.
  • The lenders may ask Toshiba to nominate one or more directors to its board.
  • JIP secured another ¥1 trillion of financing from 20 potential co-investors to back its offer. The co-investors included Japanese companies like Rohm Co Ltd ROHCY and financial services firm Orix Corp IX.
  • Price Action: TOSYY shares traded at $17.52 in the premarket on the last check Friday.
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