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How To Stop The Chain Reaction

29 March 2017 by lberuti

TOSH ( Toshiba Corp ) acquired Westinghouse in 2006 for $5.4Bln. It was a bet on a rebirth in nuclear projects on the back of high oil prices, based on the assumption that governments would cap carbon emissions to prevent global warming. Ten years down the road, after many of its projects were dogged by delays and cost overruns, Westinghouse filed for Chapter 11 bankruptcy. While TOSH estimated a month ago that writedowns related to its nuclear adventure had swelled to $6.3Bln, the company announced today that its liabilities totalled $9.8Bln. For TOSH, the aim of the Westinghouse’s filing is to fence off its soaring liability, but it will no doubt trigger a host of legal questions about whether TOSH remains responsible for losses at Westinghouse. Expectations that the company may be too big to fail for the Japanese government have been bolstering its bonds so far, but these once again revised numbers could be denting investors’ confidence. They sent TOSH’s 5-year risk premium 27bps wider to 450bps, but their concerns were best shown by TOSH’s 1-year risk premium which jumped 50bps to 772bps and is back to the wides.