Pennzoil, 6 Other Oil Firms to Help Guide Texaco’s Bankruptcy

In a decision as novel as the case itself, the trustee overseeing Texaco’s reorganization proceedings Monday appointed Pennzoil and six other oil companies to one of two separate committees that will help steer through the courts the largest bankruptcy ever filed.

Harry Jones, the U.S. bankruptcy trustee for the Southern District of New York, said he believes that this is the first time a creditors’ committee comprising strictly competitors has been appointed to play a major role in a court-assisted corporate reorganization.

Pennzoil, whose $10.3-billion claim makes it by far Texaco’s largest creditor, heads the list of oil firms named to the competitors’ committee. The second committee of 19 unsecured creditors includes banks, insurance companies, non-oil corporations and the Getty Museum.

After a sometimes heated 90-minute initial meeting of the two groups to choose chairmen--a meeting that was closed to the press--Metropolitan Life was named interim chairman of the general creditors committee. A second meeting of the committee is scheduled for today at the Metropolitan Life offices in New York.

The competitors’ group was unable to select a chairman and also will meet again today.

The unusual arrangement is the trustees’ solution to a thorny problem that threatened to stall the reorganization of America’s eighth-largest industrial corporation: what role to give Texaco’s nemesis, Pennzoil. Texaco has charged that Pennzoil’s refusal to negotiate an out-of-court settlement of their $10.3-billion legal war over the rights to Getty Oil provoked Texaco’s bankruptcy filing on April 12.

A creditor’s committee helps advise the trustee and the judge in a bankruptcy. Ordinarily, there is only one committee. But in such complicated bankruptcy cases as Manville’s, whose 1982 filing for Chapter 11 protection from the burden of billions of dollars in asbestos-injury claims marked an unprecedented use of the bankruptcy laws, there are sometimes several creditors’ committees formed.

What is unusual about the Texaco arrangement, bankruptcy lawyers said, is the formation of an all-competitors’ committee.

Texaco was pleased with the arrangement, as was Jones, who said he wishes he could take credit for the idea. It was devised, he said, by someone else in the trustee’s office. Pennzoil, while not challenging the trustee’s decision, greeted it cautiously.

Jones “did something unusual, as he said,” Michael J. Crames, Pennzoil’s bankruptcy lawyer, said after the committee members were named. “We’re going to be asking a lot of questions about this.”

Both Pennzoil and Texaco had been canvassing creditors for nearly two weeks--Pennzoil seeking a major voice in the case, and Texaco arguing that Pennzoil’s role should be limited lest it unfairly gain proprietary information about the legal battle.

By separating the competitors from other creditors, the trustee in effect gave Texaco permission to give “one set of information to one group and another (set) to the other,” said a Texaco spokesman who called the decision “a good sign.”

In addition to Pennzoil, the competitors’ committee comprises Conoco, Mobil, Amoco, Tenneco, Marathon and Coastal Eagle.