Japanese electronics firm Toshiba Corp (TYO:6502) saw shares have plummet to their lowest level since May, after news broke that the company might exceed the 500 billion yen (£3.54 billion) maximum the company had flagged to lenders.
Toshiba has approached government-backed Development Bank of Japan (DBJ) for assistance, causing shares to drop by 15 percent. Sumitomo Mitsui Banking Corp (TYO:8316) has told the nuclear business it would like to support it as much as possible.
“The key thing to watch here is whether Toshiba’s liabilities will exceed its assets. If that happens it will be difficult for some banks to step up with new financing,” said Mana Nakazora, chief credit analyst at BNP Paribas.
This crisis comes following the scandal in 2015, in which the company confessed to falsifying its profits to the tune of more than $1 billion. Problems today are expected to run much deeper as it faces a multibillion-dollar writedown on its US nuclear business.
Kyodo news agency, amongst other sources, have said that estimates have now increased to 700 billion yen, partly due to unfavourable currency rates.
The company is having to consider selling off stakes in their business. Following the 2015 scandal, Toshiba sold its medical devices unit to Canon (TYO:7751) for $6 billion and its home appliances business to China’s Midea (SHE:000333).
Toshiba Corp wants to sell a minority stake in their semiconductor business and is considering buyers such as U.S. partner Western Digital Corp (NASDAQ:WDC).
“Toshiba is grappling with the reality that it cannot sell off the nuclear business,” says Damian Thong, a Macquarie analyst.
“This leaves it with a second-best outcome, selling off the crown jewels. [It would be a shame if] Toshiba is forced to let go at a low price, even if partially, of a business that has become central to its identity and to its future growth.”
Toshiba’s shareholder equity stood at 363.2 billion yen at the end of September, 7.5 percent of total assets.
Read here about the suspension of Toshiba’s shares in December.