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Toshiba plans to raise $5 billion in capital

TOKYO - Japan’s Toshiba Corp plans to raise about 500 billion yen ($5 billion) in capital as early as June to prop up its finances, battered by loss-making chip operations and tax credit costs, a newspaper said.

The Nikkei business daily reported on Saturday that Toshiba, the world’s No. 2 maker of NAND-type flash memory behind Samsung Electronics Co, plans to issue 300 billion yen worth of new shares and seek 200 billion yen through sales of subordinated bonds to financial institutions.

It would be the electronics maker’s first new share issue in 28 years and the biggest by a Japanese company since 2001, and Toshiba aims to lift competitiveness in such key areas as semiconductors and nuclear power plant businesses by shoring up its balance sheet, the paper said.

Toshiba on Friday widened its net loss estimate by 25 percent to 350 billion yen after writing down 85 billion yen in deferred tax assets, causing its shareholder’s equity ratio to more than halve from a year ago to 8.2 percent.

It would be the first time the ratio falls below 10 percent.

“We are fully aware that our equity capital is damaged. Besides building up profits as we normally should, we have been considering various other measures to increase capital,” Fumio Muraoka, Toshiba corporate executive vice president, told a briefing on Friday.

“But we are not yet at the point where we can talk further about this,” he added.

Toshiba spokesman Keisuke Ohmori said on Saturday that he cannot say more than what Muraoka said.

A 300 billion yen new share issue would dilute share value by about 28 percent at Friday’s closing price of 332 yen.

Almost all semiconductor makers are bleeding losses, hit hard by sharp declines in chip demand and prices, prompting some to seek bankruptcy protection and others to look for partners.

As one of the fund-raising measures, Muraoka did not rule out seeking government help, although he said the firm was not currently considering applying for it.

The Japanese government is preparing legislation to allow companies hit by the global economic crisis to apply for public funds, and sources said it is looking at providing support to another struggling Japanese chip maker Elpida Memory, including possibly injecting public money.

Toshiba has mapped out a $3 billion cost cut measures this business year as it expects a 250 billion yen operating loss in the business year ended last month. The company shrunk the loss estimate by 11 percent on Friday as prices of flash memory stabilised.