Pennzoil Submits Draft Of Reorganization Plan With $4.1 Billion Payment
HOUSTON (AP) _ Texaco Inc. officials scorned a draft plan presented by Pennzoil Co. that called for a $4.1 billion payment from Texaco Inc. to resolve the companies’ ongoing legal battle.,
A Pennzoil official said Monday the proposed payment was part of Pennzoil’s draft of a reorganization plan for Texaco, which has filed for protection from its creditors under Chapter 11 of the U.S. bankruptcy law.
The payment, plus interest, would satisfy a judgment Texaco lost to Pennzoil that now stands at about $10.3 billion, the largest civil award in U.S. history. That judgment resulted in Texaco’s bankruptcy filing.
Officials for the Houston-based company say they want to file a formal reorganization plan for Texaco, including the payment, by August 11.
The proposed plan is based on an ″outrageous″ figure and is not in the best interest of Texaco’s shareholders or creditors, said Texaco spokeswoman Anita Larsen, at the company’s headquarters in White Plains, N.Y.
Texaco has until August 11 to file its own plan, but has asked for an extension. Pennzoil officials say Texaco has not come up with a reorganization strategy and is stalling in order to pursue legal appeals.
Texaco has asked the Texas Supreme Court to reverse the judgment, but Baine P. Kerr, chairman of Pennzoil’s executive committee, said Texaco’s request for an extension could move the date for filing a plan up to March 1988.
Kerr said Texaco is stalling on filing a plan because directors would rather wait for the case to move through the court system and hope for a reversal than face possible liability claims from their own shareholders.
″We think it’s in the best interests of the people who own Texaco, the real owners, and of their creditors to not extend this period of (filing) exclusivity - not roll the dice on what finally happens in this lawsuit, and come up with some reasonable solution that is beneficial to everyone concerned,″ Kerr said.
Pennzoil’s proposal would allow the shareholders to vote on whether they would like to accept the plan, he said.
″It’s less than 40 percent of the judgment, and we think it’s clearly an amount that can be paid and financed without any real harm to Texaco’s financial position, its earnings or its cash flow.
″They could decide for themselves whether they want to accept a sure thing or take the risk of litigation,″ he said.
Texaco officials criticized the plan.
A Houston jury awarded the judgment to Pennzoil in November 1985 after finding that Texaco wrongfully interfered with a planned merger between Pennzoil and Getty Oil Co.
The draft of the proposed Pennzoil settlement was filed in U.S. Bankruptcy Court in White Plains, N.Y. on Monday. Texaco filed there April 12 for protection from creditors under Chapter 11 of the federal bankruptcy code.