By Tom Hals
WILMINGTON, Del.: A U.S. judge shot down a request by creditors of Westinghouse Electric Co LLC for a bigger role in the nuclear technology company’s bankruptcy just days after its parent company Toshiba Corp proposed a restructuring plan.
U.S. Bankruptcy Judge Michael Wiles dismissed claims by the official committee of unsecured creditors that Westinghouse was not making progress in restructuring its debt.
The New York-based judge told a hearing that the creditors’ request to file their own proposal would have given them an “opportunity to throw a bomb” into the case just days after Westinghouse revealed that Toshiba had privately presented its plan.
Westinghouse can now begin negotiating with Toshiba to hammer out details of a plan to bring the company out of Chapter 11 bankruptcy in the coming months.
The company filed for bankruptcy in March after two nuclear power plants it had designed and was constructing in the U.S. Southeast had gone billions of dollars over their fixed-cost contracts.
Wiles noted during Wednesday’s hearing that creditors had leverage with Westinghouse and Toshiba without the need to file their own plan. Toshiba will need creditor approval for a plan by the end of March so it can book tax benefits from the bankruptcy in its current financial year.
Toshiba has said it wants the tax benefits from the Westinghouse bankruptcy to help offset the tax hit from the sale of its memory chip business, which is estimated to be worth $18 billion.
Toshiba put the chip business up for sale to restore its finances following an accounting scandal and the Westinghouse bankruptcy, and to avoid being delisted from the stock market.
On Friday, Toshiba sent Westinghouse a draft reorganization term sheet, which Westinghouse called “a watershed event” in the case with potential to provide “significant value” for creditors, according to court documents.
Westinghouse did not provide details of the plan.
Toshiba has acquired claims of the utilities that owned the two failed nuclear power plant projects, potentially giving it added sway in the case.
Westinghouse has also been pursuing a sale process, and the company’s attorney, Garrett Fail, said at Wednesday’s hearing that more than 100 potential buyers had been contacted. Fail said Westinghouse had not determined how and whether to proceed with a sale.
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