Icahn Appeals Approval of Texaco Plan

Texaco Inc.’s largest shareholder, Carl C. Icahn, has appealed a federal bankruptcy court’s approval of Texaco’s bankruptcy reorganization plan, restating objections already rejected by the judge.

The plan still will take effect on schedule Thursday unless Icahn also persuades the bankruptcy court judge to halt the process, which will include $5.6 billion in payments to the oil giant’s creditors.

“The mere filing of a notice of appeal does not in itself stop the plan,” said Harvey Miller, Texaco attorney. “He is fully aware that the plan is going to be consummated.”

At its White Plains headquarters, Texaco issued a statement calling Icahn’s appeal “another effort by him to distract the company from its announced restructuring.”

The nation’s third-largest oil company filed for Chapter 11 protection from its creditors last April 12, saying it had to do so to avoid having to post a potentially ruinous security bond while appealing a $10.3-billion judgment held against it by Houston-based Pennzoil Co.

In November, 1985, a Houston jury awarded the judgment to Pennzoil after ruling that Texaco had interfered improperly with Pennzoil plans to acquire part of Getty Oil Co., then bought all of Getty itself.

The two companies agreed to end their bitter dispute last December, with Texaco promising to pay Pennzoil $3 billion to drop the judgment as part of an overall bankruptcy reorganization plan.

U.S. Bankruptcy Court Judge Howard Schwartzberg approved the settlement after a day and a half of hearings late last month.

During those hearings, an attorney representing Icahn--who owns 14.8% of Texaco’s stock--said Icahn had joined other shareholders in voting to approve the plan because failure to do so could have meant the company’s demise.

But he objected to certain provisions that ultimately were retained by Schwartzberg. The objections formed the basis of the appeal, which was filed at the federal bankruptcy court in White Plains on Friday.

The first consisted of a release from legal liability of all the participants in Texaco’s ill-fated 1984 acquisition of Getty and the dismissal of stockholder lawsuits concerning that liability.

Opposed Default Provision

Icahn--and other shareholders--maintained that Texaco needlessly was throwing away a chance to recoup some of its losses by suing the people who were responsible.

He also opposed a default provision in a loan that Texaco will use to help pay for the reorganization.

Under a provision of Texaco’s agreement with a consortium of about 25 banks providing up to $3 billion in credit, the loans would be callable, on a vote by two-thirds of the banks, if a change of control takes place at the company.

That was defined as one group taking over more than half of the seats on Texaco’s board of directors, or one entity holding 30% or more of its stock.

Attorneys representing Icahn and some shareholders criticized the indemnity and change-of-control provisions as devices for entrenching Texaco’s management, making it less responsive to the company’s stockholders.

Pledge for Dissident Slate

But Schwartzberg, in approving the plan, cited representations by both companies that the indemnities were necessary to put an end to the litigation, thereby enabling them to get on with their businesses.

He also cited testimony that the banks had insisted on the change-of-control provision as a requirement for granting Texaco the $3-billion loan.

Icahn has promised to propose a dissident slate for five seats on Texaco’s 14-member board up for election at the Texaco annual meeting, now set for June 7 in Tulsa, Okla.

If he does not file for a stay within the next two days, the appeal will be assigned to a federal district judge and a timetable set for proceedings.