Moody's places Toshiba ratings under review for possible downgrade

TOKYO: Moody's placed its ratings of Toshiba Corp. under review for a possible downgrade Tuesday after the Japanese electronics and nuclear reactor maker announced it planned to purchase Westinghouse. 

Toshiba stocks slid in Tokyo trading. 

Moody's Investors Service said the purchase could become a constraint on Toshiba's finances, although it could also strengthen its nuclear business in the long run. Moody's will review Toshiba's current A3 long-term debt rating, it said in a statement. 

Toshiba said Monday it will purchase Westinghouse Electric Co., the U.S.-based unit of the British government's British Nuclear Fuels, for US$5.4 billion (euro4.5 billion). 

Toshiba said it will hold a more than a 51 percent stake in Westinghouse but is in talks with other companies about minority stakes. 

Toshiba Chief Executive Atsutoshi Nishida acknowledged in a London news conference that the price may seem high but noted Toshiba had competition in the bidding. 

Underlining doubts in the market about the plan, Toshiba stocks slid in Tokyo on Tuesday. 

In afternoon trading they were down 0.5 percent at 740 yen (US$6.20; euro5.2). 

Toshiba shares have shot up over the last year as the Tokyo-based company's books improved on better sales, but have dipped recently on reports about the Westinghouse bid. 

The Standard & Poor's rating agency placed Toshiba's ratings under review last month when the Westinghouse news surfaced, citing analysts who said that paying too much could hurt Toshiba's other operations, which include electronics and computer chips. 

But analysts also say the nuclear business is attractive for Japanese manufacturers because of its huge potential in China, which plans to build more nuclear power plants to meet booming energy demand. 

The purchase of Westinghouse gives Toshiba a different kind of technology called pressurized water reactors, which have a larger global market share than the kind of power plants that are Toshiba's expertise, called boiling water reactors. 

In its review, Moody's will examine how the purchase of Westinghouse will affect Toshiba's financial profile and how Westinghouse may contribute to Toshiba's overall profitability, it said. - AP

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