Pennzoil to Texaco: Settle for $4.1 Billion : Ties Offer to End $10-Billion Suit to Bankruptcy Plan

Pennzoil Co. filed a proposed reorganization plan today for Texaco Inc. that would allow Texaco to pay Pennzoil $4.1 billion of the more than $10 billion judgment it lost in a lawsuit.

The proposal was filed in U.S. Bankruptcy Court in White Plains, N.Y., where on April 12 Texaco sought protection from its creditors under Chapter 11 of federal bankruptcy laws.

This is the first time Pennzoil has tied its willingness to accept $4.1 billion to Texaco’s bankruptcy petition.

Texaco’s bankruptcy filing stemmed from a judgment, now valued at $10.3 billion, that was awarded to Pennzoil after a Houston jury found that Texaco had improperly acquired Getty Oil while Getty was engaged in a merger with Pennzoil.

Satisfying Creditors

Under Pennzoil’s proposal, all creditors of Texaco would have their claims satisfied in full with interest from April 12 to the date of payment, and dividends to shareholders would be resumed immediately, according to a statement issued by Pennzoil today.

The proposal asks for $4.1 billion in cash plus interest for Pennzoil to settle its dispute with Texaco.

Under bankruptcy rules, Texaco has 120 days from the time it files to submit a reorganization plan and an additional 60 days to get it approved. Texaco asked the court last week for more time to submit its plan.

Pennzoil filed documents today opposing an extension.

Cost Would Rise

“Prolonged delay while Texaco pursues its ‘high-roller’ litigation strategy increases the overall cost of Texaco’s bankruptcy,” Pennzoil’s statement said.

The plan being considered by Texaco would pay all creditors except Pennzoil, whose claim would be isolated and paid only when the companies’ litigation has been resolved outside bankruptcy court, the Wall Street Journal reported today.

Harvey Miller, Texaco’s bankruptcy counsel, said: “For four weeks or more we have been requesting a plan and they have refused to give it to us. I can’t give you an official reaction to the $4.1-billion figure from Texaco, but when that number was floated about earlier, it was considered an unreasonable sum.”

The newspaper has quoted sources as saying the company is willing to settle only for less than $1 billion.

Not Formally Studied

A source on one of the Texaco creditors’ committees said in an interview with the Houston Chronicle over the weekend that the Pennzoil terms, including the $4.1-billion sum, have not been formally considered by the committee.

“We would have to evaluate the terms of the proposal before we could make a conclusion about whether to support it or disapprove it,” the unnamed source told the Chronicle.