Analysts Doubt Texas Would Seek Bankruptcy Protection
NEW YORK (AP) _ Texaco Inc. and some analysts say that although the company might be unable to post a $12 billion bond to appeal a $10.53 billion damage verdict, it is uncertain whether the bond will be necessary.
Texaco President Alfred C. DeCrane Jr. was quoted Tuesday as saying that if the $12 billion bond is required, Texaco might be compelled to reorganize under federal bankruptcy laws. His comments sparked a surge of selling by investors.
Roy Babbitt, a former U.S. bankruptcy court judge who now is an attorney in private practice in New York, said Texaco ″would probably want to exhaust every conceivable proceeding ... to reduce the judgment, set aside the judgment, or attenuate the judgment before filing a Chapter 11″ petition seeking protection from creditors.
″What they’re doing is playing their cards, so that the judge has to think about this,″ said Rosario Ilacqua, an analyst with the New York securities firm of L.F. Rothschild, Unterberg, Towbin. ″They’re laying it on the table that if the judge wants to follow the recommendations of the jury ... they might be forced to take drastic countermeasures.″
Last week, a Houston jury recommended that Texaco pay Pennzoil $10.53 billion in damages. The jury found that Texaco improperly gained control of Getty Oil Co. by breaking up a merger agreement between Getty and Pennzoil.
State District Judge Solomon Casseb Jr. will hear arguments Dec. 5 on whether he should uphold the jury’s recommendation. He can either approve both the verdict and the size of the damages, uphold the verdict but reduce the damages, or throw both out and order a new trial.
Texas law requires that if defendants appeal a damage judgment, they must post a bond in cash or liquid assets equal to an award plus attorneys’ fees and interest. If the judge affirms the jury’s entire $10.53 billion award, the appeal bond would total $12 billion.
″If a $12 billion bond is required - Texaco doesn’t have $12 billion and in my opinion, probably can’t get it - then we’d have to look for some heroic measure, whether it’s Chapter 11 or whatever,″ DeCrane was quoted as saying in the Dallas Morning News.
Because of the selling of Texaco stock Tuesday, the New York Stock Exchange suspending its trading for 59 minutes. Texaco finished the day at $32, down $2.25 from Monday.
After its stock started sliding, Texaco issued two statements from its headquarters in White Plains, N.Y., stressing that the case was not over. The company also said it was not ruling out Chapter 11, but such a move only would be considered ″after all other legal remedies had been exhausted.″
″We believe and will urge the court that it would be absurd and irresponsible to force Texaco into bankruptcy by requiring an impossible bond,″ the company said.