The best option is for Toshiba's lenders to keep credit flowing but beyond that, the conglomerate also needs a complete overhaul at the top, the president of a market intelligence company said on Wednesday.
Toshiba met with creditors on Tuesday to negotiate credit terms and request that they don't use the provision in debt agreements to call in their loans early, so as to give the embattled company time to work out a plan, sources familiar with the matter told Reuters.
Toshiba's main lenders agreed to continue backing the 142-year old electronics conglomerate, but additional capital support will depend on its turnaround plan, Nikkei Asian Review reported early on Wednesday.
"It really is in the banks best interest to extend credit further to Toshiba and try to get it back on its feet," said Roger Kay, president and founder of Endpoint Technologies Associates, in a Squawk Box interview.
He added that Toshiba's semiconductor business is still healthy, and there's speculative talk that the company could sell some of that business to raise cash and appease banks.
It is also important to note that Toshiba's goodwill impairment is a non-cash event, said Damien Thong, analyst at Macquarie Capital Securities, in a note on Monday.
Thong also added that "Toshiba's liquidity is likely more than enough to cover bond redemptions and capex (capital spending) over the next year even without operating cash inflows or fresh external financing beyond the untapped commitment line."
The Japanese conglomerate announced on Dec. 27 that it might book goodwill charges of "several billion U.S. dollars" related to its U.S. subsidiary Westinghouse Electric's nuclear acquisition, and which will impact Toshiba's financials. Since the announcement, shares of Toshiba have tumbled 23 percent.
Beyond securing creditors' commitment to continue backing Toshiba, the company also needs to completely overhaul its board which are mostly insiders and take full control of the management team, Endpoint Technologies Associates' Kay said.
Toshiba's latest trouble comes about a year after when it was embroiled in an accounting scandal, in which profits were padded by more than $1 billion between 2008 and 2014. The company was fined a record $60 million by Japanese regulators.
"Even though they did change half of the management team 18 months ago, it looks to me that they have to clean the rest of the house… if you have repeated financial scandals, then there's something systemic that has to be addressed," Kay said.