Toshiba wins unusual auditor sign-off, puts off delisting

Cash-strapped Toshiba has put off delisting after its accounting won auditor approval, albeit with a stern rebuke, leaving its listed status largely dependent on whether it can complete the sale of its chip business by March, Reuters reported.

The Japanese conglomerate, as a listed entity, was required to file last year's finances by June, but delayed due to disagreements with its auditor about multi-billion-dollar losses at now-bankrupt U.S. nuclear power subsidiary, Westinghouse Electric.

"It's cleared the first hurdle," Makoto Kikuchi, CEO at Myojo Asset Management, told Reuters. "The second hurdle will involve negotiating the sale of its chips unit, currently in dispute. There's still a risk it will not be able to fix its excess liabilities, and be delisted."

PriceWaterhouseCoopers Aarata (PwC) gave a "qualified opinion" on Toshiba's financial results for the year ended March 31, as well as for April-June, meaning it broadly vouched for books that contained minor problems.

But PwC also issued a separate "adverse opinion" on corporate governance, saying Toshiba was late in booking Westinghouse losses, Kallanish Energy understands.

A sole adverse opinion could have prompted the 140-year-old firm's delisting. That would have damaged its creditworthiness just as it scrambles for funds to pay debt and cover the impact of $6.3 billion in liabilities linked to Westinghouse.

Toshiba, which admitted in 2015 to inflating profits over seven years, has resorted to seeking cash through the sale of its cash cow flash memory business, valued at $18 billion — a business that comprised 93% of April-June operating profit.

Adding urgency to the chip sale, Toshiba needs funds to avoid ending a second consecutive financial year with negative net worth, where liabilities exceed assets. Back-to-back years of negative worth is also grounds for delisting.

The sale has been complicated by Western Digital, a partner in Toshiba's primary chip plant, taking Toshiba to court arguing any sale requires its consent.

Toshiba's preferred bidder, a consortium of Japanese government-backed funds, U.S. private equity firm Bain Capital and South Korean chipmaker SK Hynix, has insisted disputes are settled before completing the deal.

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