Hedge fund The Baupost Group LLC has acquired the biggest chunk of a $2.2 billion claim that two South Carolina utilities had against Toshiba Corp following the bankruptcy of its nuclear power subsidiary, people familiar with the matter said on Monday.
The investment is a bet by Baupost`s chief executive, Seth Klarman, that Toshiba, which has been rocked by accounting scandals as well as the financial demise of its bankrupt U.S. nuclear unit Westinghouse Electric Corp, will stand up to its pledge to pay out these claims.
Baupost bought the claims after utilities SCANA Corp
By selling the claims, the utilities got cash upfront instead of having to wait for instalments over the next five years and face the risk that Toshiba might not pay.
Like other hedge funds that invested in the claims, Baupost paid about 92 cents on the dollar, the sources said.
Boston-based Baupost has shown appetite for assets in financial distress before. It also owns about $1 billion in bonds backed by sales tax revenue from Puerto Rico, the U.S. territory struggling to service its more than $70 billion in debt.
The exact amount that Baupost invested in the claims owed by Toshiba could not be learned. Other investors in the claims included private equity firm Blackstone Group LP`s
The sources asked not to be identified because the trades were carried out on a confidential basis. Baupost, Toshiba, Blackstone, Westinghouse and SCANA declined to comment.
Toshiba is also on the hook to cover some of the cost overruns at another unfinished nuclear project known as Vogtle in Georgia.
Georgia Power, an affiliate of Southern Co
When the Georgia and South Carolina projects were approved a decade ago, they were seen as the dawn of a new era in nuclear power plant construction, but Westinghouse filed for bankruptcy in March in part because of the escalating costs at the plants.
A Georgia Power spokesman said the utility is continuing to "explore options of monetization of the parent guarantee" with regards to the Vogtle project.
Much of Westinghouse`s business is currently up for sale and expected to fetch as much as $4 billion, Reuters reported last month. Blackstone has partnered with private equity firm Apollo Global Management LLC
Funds from the sale of the Westinghouse business will help Toshiba offset some of the payments it owes to the utilities due to Westinghouse`s not completing its projects.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)