Fitch puts Toshiba on negative watch

Fitch Ratings said it put Toshiba Corp.'s BBB+ senior unsecured foreign currency and local currency ratings on Rating Watch negative following the company's announcement that it will purchase Westinghouse Electric Co. from British Nuclear Fuels plc. for $5.4 billion. Toshiba's F2 short-term rating was affirmed.

According to Toshiba's announcement, it will retain a more than 51% capital interest in Westinghouse and remain the majority and controlling shareholder of the company, although it expects to have several minority investors who wish to participate in the acquisition.

Fitch said it will evaluate the impact of higher net financial leverage resulting from the acquisition and how the acquisition of Westinghouse's operations and technologies will contribute to Toshiba's performance and market position in the global nuclear power plant business during the coming months.

The demand outlook for power generation facilities in Japan, on which Toshiba has depended heavily, continues to be weak, the agency said. Major Japanese electric power companies have significantly reduced their capital expenditures to strengthen their balance sheets, preparing for the on-going de-regulation. To compensate for its weak domestic operations, Toshiba seeks to enlarge its electric power plant businesses in overseas markets.

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