Toshiba Seeks $2.5 Billion Credit Line to Pay for Reforms

  • Company got $3.3 billion credit commitment in September
  • Fundraising choices limited by accounting scandal, rating cut

Toshiba Corp. is seeking its second credit line from banks in three months, aiming to gain access to an additional 300 billion yen ($2.5 billion) as it faces mounting costs from an accounting scandal that has led to layoffs and asset sales.

The company plans to apply for funds by the end of January, said spokeswoman Yuu Takase. Combined with the 400 billion yen credit line Toshiba received in September, that would bring Toshiba’s total loan facility to more than 1 trillion yen, Takase said.

Toshiba, which last week forecast a record 550 billion yen annual loss, needs money to pay for thousands of job cuts and the overhaul of the businesses that make televisions and PCs. President Masashi Muromachi, who took over this year to clean up after an accounting scandal that has wiped about $8 billion in market value, has said there will be no public fundraising for two years.

The shares gained 2.7 percent to close at 232.1 yen in Tokyo while the benchmark Topix index was little changed. The stock has slumped 55 percent this year as the company withdrew its earnings forecast in May and announced an accounting probe that was later expanded.

Moody’s cut its credit rating on the company two levels to junk earlier this month. The spread on Toshiba’s bonds due in 2020 jumped 100-fold this year to 311 basis points, reflecting the risk premium investors demand over the yen swap rate. The company hasn’t sold debt since July 2014.

Sumitomo Mitsui Banking Corp., Mizuho Bank and Sumitomo Mitsui Trust Bank provided the credit line in September. Spokeswoman Takase declined to give names of lenders for the current round of financing.

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