Westinghouse Set to Obtain $800 Million Bankruptcy Financing

  • But judge questions money set aside for non-U.S. affiliates
  • Apollo, Citigroup won competitive bidding for funding package

Westinghouse Electric Co. won tentative permission to take out an $800 million loan to carry it through bankruptcy, but the judge overseeing its Chapter 11 case asked for more information about the use of some of the proceeds to support foreign, non-bankrupt units.

The Pennsylvania-based company, a unit of Toshiba Corp., filed for bankruptcy Tuesday and laid out plans to cast off money-losing businesses like reactor building and focus on decommissioning and services. Gary Holtzer, an attorney for the company, told U.S. Bankruptcy Judge Michael Wiles at a hearing Wednesday in Manhattan that Westinghouse also wants to address “pension issues” and make other businesses more efficient.

Westinghouse said it needs the loan to keep its position as a safe and innovative provider of nuclear services and plans to use as much as $375 million of the financing for foreign, non-bankrupt affiliates. Collateral linked to the construction of four nuclear reactors in Georgia and South Carolina -- projects in which Westinghouse is putting its involvement on hold -- isn’t backing the loan, according to court records.

‘Ordinary Course’

“I don’t think this level of intercompany lending is what I would call in the ordinary course of business,” Wiles said at Wednesday’s hearing. The judge said he was concerned that the U.S. company was risking its assets to shore up European affiliates, and he requested more information about how U.S. creditors’ collateral would be protected.

Westinghouse said that it would come up with an agreement explaining how the non-U.S. affiliates would guarantee the loans but that the money is needed right away. Wiles approved an interim $350 million draw on the loan and will consider the remainder of the funding at a later hearing.

For the past five weeks, Westinghouse’s non-bankrupt European affiliates haven’t been able to obtain letters of credit, Lisa J. Donahue of AlixPartners LLP, who is advising Westinghouse, told the judge. While the foreign businesses are strong, Westinghouse’s financial troubles have caused short-term problems, she testified.

A lawyer for Toshiba said the money is urgently needed to assure customers of the non-U.S. units and to keep those businesses, which are globally integrated, functioning, particularly as an audit has caused stress throughout the entire company.

Competitive Bidding

The so-called debtor-in-possession loan comes from Apollo Global Management as initial lender and Citigroup Inc., which is offering a $225 million letter-of-credit facility. Their offer beat a similar proposal by Goldman Sachs Group Inc., Highland Principal Strategies Investment Partners LLC and Silver Point Finance LLC in a competitive bidding process, according to court records.

According to a letter filed with the court, Goldman Sachs came back Tuesday with an even more favorable offer after Westinghouse selected the Apollo loan.

“We believe we can provide a much more favorable financing than the alternative currently being considered,” Goldman Sachs said in the letter, offering to reduce the loan’s funded spread and reimburse costs associated with pursuing the rival offer, while otherwise keeping the same terms as the Apollo and Citigroup proposal. 

Goldman Sachs and its partners said they came forward because they realized after bidding ended Sunday that Toshiba is prepared to provide a backstop guarantee of as much as $200 million on the loan.

Tokyo-based Toshiba bought Westinghouse in 2006 as a bet on the future of nuclear power, a hope that soured after Japan’s 2011 Fukushima meltdown and a flood of cheap natural gas in the U.S. damped demand. In announcing the filing Tuesday, Toshiba said it would take a loss of $9.1 billion.

The case is In re Westinghouse Electric Co., 17-10751, U.S. Bankruptcy Court, Southern District of New York (Manhattan).