By Makiko Yamazaki and Ritsuko Shimizu
TOKYO (Reuters) -A consortium led by Japan Industrial Partners (JIP) has formally submitted a proposal to Toshiba Corp to take the troubled conglomerate private after securing commitments for 1.4 trillion yen ($10.6 billion) of loans, sources said.
Major Japanese banks, including Sumitomo Mitsui Financial Group, had issued letters of commitment to provide the loans to the JIP-led group, said two of the sources, who declined to be identified because the information has not been made public.
The 1.4 trillion yen of loans included a commitment line of 200 billion yen for working capital, the sources said.
The final buyout proposal would also include an equity portion of about 1 trillion yen, they said. Whether that amount has been finalised is not clear, however.
The Nikkei business daily reported a final buyout proposal worth around 2 trillion yen.
Sources have previously said the equity would be provided by a number of Japanese companies, including financial services group Orix Corp, chipmaker Rohm Co Ltd and Japan Post Bank.
Securing firm commitments from the banks was a major hurdle in the group’s efforts to pull together a bid to buy Toshiba and take it private, according to the sources. The offer will now need to go to the conglomerate’s board for approval.
Toshiba said it would not make a comment immediately. JIP, a private equity firm, declined to comment.
Shares of Toshiba fell some 3% in Tokyo trade, potentially reflecting investor calculations that a rival bidder – with a higher offer – might now be less likely to emerge, because the financing had been secured.
Toshiba named the JIP-led group as its preferred bidder in October. JIP was then asked by Toshiba to provide commitment letters from banks by Nov. 7, something it was unable to do.
The loan deal had taken a few months to finalise, causing a delay in the submission of the bid, as JIP, equity partners and the banks had worked to resolve disagreements over post-buyout restructuring plans, the sources said.
The banks asked Toshiba to promise the sale of underperforming businesses if earnings deteriorated after a buyout was concluded, sources, including those who spoke on Thursday, have previously said.
They also requested Toshiba to agree, following the proposed buyout, to set up a committee including investor representatives to monitor management, according to sources who spoke previously. The banks also wanted Toshiba to accept bank executives sent to the company.
Some of the demands are still being discussed.
“There is serious risk here that this doesn’t get done. There are lots of people who could say no,” said analyst Travis Lundy of Quiddity Advisors, who publishes on Smartkarma. But big Toshiba shareholders “might just accept a sup-optimal result because it gets them out.”
($1 = 131.7100 yen)
(Reporting by Makiko Yamazaki and Ritsuko Shimizu; Additional reporting by Satoshi Sugiyama and David Dolan; Editing by Jamie Freed and Bradley Perrett)