The nuclear option of bankruptcy could give Toshiba a fresh start, The Wall Street Journal reported today. It’s a nice idea, but the embattled Japanese giant is more likely to choose to muddle through. A number of people involved in Toshiba’s restructuring are pushing for a bankruptcy filing as the best path to rebirth. Bankruptcy would give the Japanese company, which has more liabilities than assets because of losses in its nuclear operations, more breathing room as it restructures its debts with creditors. To plug its financial hole, Toshiba is currently trying to sell its memory-chip business. The sale, however, is being delayed by a legal challenge from its joint-venture partner, Western Digital. But even completing the sale would just bring Toshiba’s shareholders’ equity barely into positive territory. The company could still be hit by tons of other uncertain liabilities, in particular, a liquefied-natural-gas contract in the U.S. Toshiba signed a 20-year agreement in 2013 to liquefy natural gas in Freeport, Texas, starting from 2019. Since then, Asian LNG prices have plunged, making the company liable for billions of losses. And Toshiba, after selling its crown-jewel chip business, would be left with less profitable businesses to cover those losses. Instead of emerging anew from the nuclear mess, Toshiba will likely stay a radioactive zombie.
