Texaco Gets 40-Day Extension for Reorganization Plan
After testimony that progress has been made in settling the $10.3-billion dispute between Texaco Inc. and Pennzoil Co., a federal bankruptcy judge on Wednesday gave Texaco 40 more days to offer its own plan to emerge from Chapter 11 bankruptcy.
But U.S. Bankruptcy Judge Howard Schwartzberg gave the go-ahead for a creditors committee to continue to float a plan offering a base and a cap for a possible settlement. Schwartzberg also said he would terminate Texaco’s exclusivity period if two-thirds of the Texaco shareholders approved the limits.
In addition, Texaco’s newest large shareholder, TWA Chairman Carl C. Icahn, offered through his attorney to help facilitate a settlement between the two oil companies.
Icahn was seeking to buy 24 million shares of Texaco to add to the 6 million he already owns, according to his attorney David Friedman.
A Texaco offer for a base-cap plan was revealed through the testimony of Charles Luce, head of the general unsecured creditors committee, which opposed giving Texaco more time to file its exclusive reorganization plan.
Luce, who has been actively trying to negotiate a settlement, said Texaco Chief Executive Officer James Kinnear was willing to offer Pennzoil a base payment of $500 million with a cap of $3 billion.
However, Luce said, Kinnear wanted Luce to tell Pennzoil that the offer started at $370 million with a $2.6-billion cap.
Pennzoil, which also opposed the extension of exclusivity, has said it would accept $1.5 billion as a non-refundable payment while Texaco seeks appeal and would want an additional $3.5 billion, or a total of $5 billion, should Texaco lose the case.
Schwartzberg made the ruling after an almost seven-hour hearing in a packed courtroom during which Texaco had sought an extension of its exclusive period until Jan 18.
Schwartzberg had granted an extension last July giving Texaco until Dec. 8 to file a plan of reorganization, but Wednesday he terminated that period and put the new 40-day period into effect, setting the deadline of Jan. 11.
“Exposure is greatest for the shareholders . . . whose ox stands to be gored here,” Schwartzberg said. “It is essential a consensual plan be worked out.”
Texaco had filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code last April 12. The filing stemmed from a $10.3-billion judgment awarded rival Pennzoil when a Texas jury ruled that Texaco had illegally interfered with Pennzoil’s takeover of Getty Oil.
On Nov. 2, the Texas Supreme Court refused to hear Texaco’s appeal, leaving the giant oil company to seek redress with the U.S. Supreme Court.
Texaco attorney Harvey Miller argued that Texaco sought to pursue a dual track: pursue settlement talks as well as apply for a right to be heard by the nation’s highest court.
“We’ll get involved in marathon negotiating sessions to resolve this case or find a formula whereby we can limit our exposure,” Miller declared.
But, he said, the atmosphere of negotiations should not occur while competing plans of reorganization were being submitted.
“Substantial progress could be made within 40 days to a consensual plan or another resolution,” Miller said, adding that Texaco was ready to meet “any time, any convenient place” to negotiate.
Joel Zweibel, the creditors committee attorney, argued that no meaningful progress in talks has really occurred. George Weisz and Tom Moloney, representing the industry committee, echoed that sentiment.