Toshiba Agreement in Limbo as Negotiations Reach Impasse

Toshiba Corp.'s preferred bidder will not secure letters of commitment from banks by the end of the year, raising more doubts about a deal as disagreements over lending terms continue after months of negotiations.

‍
A consortium of investors led by Japan Industrial Partners Inc. is in talks with banks to secure financing totaling around 1.4 trillion yen ($10.6 billion) to take Toshiba private. However, negotiations have stalled over covenants and collateral, preventing banks from deciding how much funding each would provide, according to people familiar with the matter.

‍
JIP has also requested additional subordinated loans and other forms of mezzanine capital, with talks still ongoing, the people said. JIP is hoping to secure additional financing to help support its operations and growth.
Banks that were expecting to sign off on 1.2 trillion yen in syndicated loans to help finance the buyout deal and another 200 billion yen to cover operational costs after Toshiba's privatization will now have to wait until the new year, according to sources.

‍
According to reports, Japanese banks have agreed to support Toshiba's preferred bidder in its ongoing sale process. The move is seen as a boost to the preferred bidder's chances of success.
Sumitomo Mitsui and JIP spokespeople both declined to comment when asked about the situation.
JIP is expected to offer around 2.2 trillion yen for Toshiba, and plans to decide on an offer price once it secures commitment letters. Toshiba may then hold a special committee meeting in mid-January to discuss JIP’s offer, the people said.

‍
Banks have been unwilling to finance Toshiba's privatization efforts, complicating the company's efforts to turn itself around. Rising financing costs and a deterioration in banks' trust in Toshiba's management have thrown up roadblocks to a deal.
To improve operational efficiency after the takeover and Toshiba's subsequent delisting, lenders may ask to nominate one or more directors to the company's board, the people said.

‍
JIP has secured another 1 trillion yen in financing from about 20 potential co-investors, Bloomberg News has reported. This includes Japanese companies such as Rohm Co. and financial services firm Orix Corp.
According to reports, Toshiba has tapped Rohm and Suzuki for funding in its bid to become the preferred bidder for the company. Toshiba is said to be seeking around $5 billion in funding from the two companies.