Toshiba Falls by Record as Ratings Cut

Toshiba plunged by the most on record in intraday trade after the company’s credit ratings were cut following an announcement it may write down billions of dollars of an acquisition made by U.S. unit Westinghouse Electric, according to Bloomberg. The shares fell as much as 26 percent, the most since 1974, according to available data, to 232 yen in Tokyo on Thursday.

The stock plunged a day earlier after Toshiba issued a statement saying that while the final writedown was yet to be determined, it would affect earnings. That was followed by Moody’s Investors Service, Rating and Investment Information Inc. and S&P Global Ratings all cutting their ratings on Toshiba’s credit. The potential loss is related to a dispute over the value of a nuclear construction unit acquired by Westinghouse that was geared toward completing the newest generation of reactors at two U.S. facilities, which are behind schedule and over budget. Toshiba’s financial standing could come under further strain, according to a statement from S&P. Toshiba’s market value has declined by about $6.8 billion this week.

The risk that emerged in its nuclear business may negatively impact the evaluation of company’s risks, R&I said. The agency added that it can’t ignore the fact that being on the Tokyo Stock Exchange’s alert list would limit Toshiba’s means to increase capital. Toshiba didn’t elaborate further when announcing the potential writedown earlier this week, other than to say that the writedown would exceed an initially anticipated amount of $87 million, and would probably be in the billions. The increase in charges is related to project costs incurred by CB&I Stone & Webster, a nuclear construction and services company that was acquired by Westinghouse in January.