S&P Global Inc. said in a report yesterday it could cut its rating of Toshiba Corp credit by several notches should the Japanese firm receive financial support that includes debt restructuring, sending Toshiba stock down nine per cent.

S&P rates Toshiba credit as junk, at CCC+, following downgrades in December and January, after the conglomerate flagged a multi-billion dollar writedown in its nuclear power business. The credit-rating firm expects banks to help Toshiba, including by extending deadlines for loan repayments.

Any further downgrade would prompt banks to charge Toshiba even higher rates for credit, at a time when the conglomerate is dealing with the crippling writedown while still working to recover from a financial scandal in 2015.

“If any financial support includes debt-to-equity swaps or changes in loan conditions, we would consider that as selective default,” S&P Global analyst Hiroki Shibata said in a telephone conference later on Friday. “In that event, we might cut its rating by several notches.”

Shibata drew comparison with Sharp Corp. In 2015, S&P rated the panel maker’s debt ‘selective default’ after it agreed a 200 billion yen (£1 billion) debt-to-equity swap with main lenders Mizuho Bank Ltd and Bank of Tokyo Mitsubishi UFJ Ltd.

The next day, S&P raised the rating to junk, at B-, expecting the bailout to strengthen Sharp’s finances. But five months later, S&P cut the rating further into junk, to CCC-, as Sharp’s main business failed to improve.

On Thursday, Sumitomo Mitsui Financial Group Inc’s banking unit – one of Toshiba’s main lenders – said it would provide the conglomerate with as much support as possible. The other main lender is Mizuho Financial Group Inc

A day earlier, Toshiba executives asked creditors for an extension of a waiver for a loan covenant violation until the end of next month, people familiar with the matter told Reuters.

S&P’s Shibata yesterday also said the credit-rating firm was closely watching Toshiba’s likely sale of its chip business.

Toshiba initially planned to sell less than 20 per cent of its NAND flash memory unit, but is now considering selling most or all the business some time after March 31, a person with knowledge of the matter told Reuters.

The chip business is cyclical and capital intensive but currently generates stable profit, so its sale could essentially be negative for Toshiba, Shibata said.

A Toshiba spokesman said the firm is not in a position to comment on the assessments of credit-rating firms.

Separately, Toshiba said in a stock exchange filing on Thursday that it would buy three per cent of US nuclear power subsidiary Westinghouse Electric Co LLC from IHI Corp for $157 million, after the Japanese infrastructure firm exercised an option to sell.

The multi-billion dollar writedown in Toshiba’s nuclear business stemmed from a unit owned by Westinghouse.

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