Exclusive: Hedge fund Baupost snaps up claims against Toshiba - sources

By Jessica DiNapoli and Tom Hals

(Reuters) - 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 by its pledge to pay out these claims.

Baupost bought the claims after utilities SCANA Corp and Santee Cooper decided they did not want to wait for Toshiba to make the payments, which were owed to them as penalty for Westinghouse's failure to complete a contract to design and build a nuclear power plant in South Carolina.

By selling the claims, the utilities got cash upfront instead of having to wait for installments 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 credit arm GSO Capital Partners LP, according to the sources.

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, plans to conduct a similar auction of its rights to collect $3.7 billion from Toshiba for the problems at the project over the next several years for an immediate cash payment as soon as this month, the people said.

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 in a bid for that business, Reuters has reported.

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.

(Reporting by Jessica DiNapoli in New York and Tom Hals in Wilmington, Delaware; Editing by Leslie Adler)