Toshiba's nuclear unit Westinghouse to file for bankruptcy in US

The American nuclear unit of Japanese conglomerate Toshiba is to file for bankruptcy protection in the US, the Japanese government has confirmed.

Yoshihide Suga, the government's chief spokesman, told Reuters he was aware that Pittsburgh-based Westinghouse Electric was planning a Chapter 11 filing.

Sources told the agency that the filing could come as early as 4 April.

Westinghouse is facing cost overruns at its reactor projects in Georgia and South Carolina, with Toshiba revealing a $6.3bn (£5.1bn) writedown at the nuclear business in February.

That led to the troubled company posting a loss of $3.5bn in the nine months to December period and the resignation of chairman Shigenori Shiga.

Japan's Nikkei business daily reported earlier that Toshiba's board had approved plans for Westinghouse to file for bankruptcy protection.

The conglomerate reportedly plans to make infrastructure its core business after Westinghouse is removed from its consolidated books. It has guaranteed to cover around $7.2bn of the US nuclear unit's debts.

"Toshiba's decision likely stems from its thinking that there are big merits in limiting the risk of future loss expansion... and increasing the possibility of continued financing from financial institutions," Toshiyasu Ohashi, chief credit analyst at Daiwa Securities, told Nikkei.

"[But] applying for bankruptcy comes with the risk of additional expenses, including the fulfillment of the parent company's guarantee.

"There is no material outsiders can use to objectively judge whether the pros outweigh the cons."

Toshiba bought a majority stake in Westinghouse for $5.4bn in 2006, but the nuclear business ran into significant cost overruns following the Fukushima nuclear accident in Japan in 2011.

Westinghouse also incurred substantial losses on its 2015 acquisition of a nuclear construction and services business from Chicago Bridge & Iron, after it came to light the assets it took control of were worth less than initially thought.

Toshiba has been given permission by Japanese regulators to delay releasing its third-quarter results until 11 April.

Its share price closed 1% higher in Tokyo on 29 March.