Westinghouse Electric Company LLC was launched in 1999, as a nuclear power company which would be providing nuclear products. The head office is located in Pittsburgh, Pennsylvania with Toshiba been the majority owner of the entity. Till 2014, Westinghouse was considered to be building and operating nearly fifty percent of the world’s nuclear plants. Westinghouse files for Bankruptcy under Chapter 11 bankruptcy.
According to Toshiba, filing bankruptcy under chapter 11 would limit the damages due to the losses suffered by the company last year on the verge of expansion. The decision would be finalized after the meeting on Tuesday and a petition would be filed for bankruptcy. Now, what exactly is Chapter 11 and how will it help Toshiba to keep Westinghouse alive?
There are two ways to file for bankruptcy: chapter 7 and chapter 11. In Chapter 7, the operations are completely ceased and the trustee is supposed to sell all the assets in order to pay back to the creditors. After selling of the assets, the creditors are firstly paid off and at the end, if any amount remains, then it is handed back to the owner of the business.
In chapter 11, in many of the cases, the owner of the business remain as the controller of the business as Debtor in possession and is in constant supervision of the court and id abided with the rules and regulations laid down by the court. In the case of a trustee involved, the trustee has the rights to be involved in the business activities of the company and run it. The debtor can also restructure the current business by raising fresh funds through various sources like loans, credits etc.; whoever the newly created creditors would be the in first priority to be paid back.
The court issues an Automatic Stay which will protect the debtor from any other indictments and would also put on hold all the collection activities executed by creditors. In case the company doesn’t perform well and the company is termed as Insolvent, then the debtor won’t have any rights and all his rights will get transferred to the creditors leaving them to decide if they want to restructure it their way or not.
In case of Westinghouse, Korea Electric Power Corp would be its new creditor that would support its restructuring after filing for bankruptcy. In this way, Toshiba would still remain the main owner and this would eradicate many risks. This would be a time-consuming process since restructuring such a huge giant won’t be an easy task.