WALL STREET STOCKS/TEXACO <QTX>, PENNZOIL <PZL>
Texaco Inc's decision to file for
protection under the bankruptcy code had a chilling effect on
its stock, and sent Pennzoil Co's shares sharply lower as well,
traders said.
    Texaco dropped 3-1/2 to 28-3/8 and Pennzoil fell 12-7/8 to
79-3/8.
    "A lot of people had bid up Pennzoil, expecting a
settlement of two to five billion dlrs in this case," energy
analyst Rosario Ilacqua of L.F. Rothschild said, "and now
nobody knows where this is going to settle out."
    "It seems to me that the hope of an out of court settlement
in this long running court case had a greater relative impact
on Pennzoil's stock then on Texaco's," analyst Sanford
Margoshes of Shearson Lehman Brothers said, citing the sharper
decline in Pennzoil this morning.
    The litigation arose when Pennzoil sued Texaco for
interfering in its 1984 agreement to acquire Getty Oil. In
1985, a Texas state court ruled in favor of Pennzoil and
ordered Texaco to pay 10.53 billion dlrs in damages.
    Citing the burden of the court case and a Supreme Court
ruling last week in favor of Pennzoil concerning the amount
Texaco must put up as a bond while appealing the case, Texaco
filed for the Chapter 11 protection on Sunday.
    "That decision puts Pennzoil in the unsecured creditor
catagory and that means they have lost their preferred
position, which is causing the most damage to the stock today,"
Margoshes said. "They will only be able to collect payment
after secured creditors have collected," he said.
    "From the standpoint of the attractiveness of Texaco's
stock," Margoshes said, "I have turned quite bullish."
    "I think there is an overreaction in the downside of the
(Texaco) stock today, with some investors believing that Texaco
cannot effectively conduct its business. But only Texaco Inc
and two subsidiaries are under protection, and there is no
indication that they will not be able to proceed adequately,"
Margoshes said. In addition, he noted, "there are insitutions
that just cannot legally--according to their own
regulations--hold a stock that is in bankruptcy. That caused
much of the selling at the opening," he said.
    L.F. Rothschild's Ilacqua said "you have to wonder if an
interim settlement can be reached between the two or if this
thing is going to go the full legal route, and that is what
investment decisions hinge on."
    He said "if this whole thing settles with Texaco owing a
lot less than the 10 billion dlrs, speculating in Texaco stock
could be quite interesting." He expects the stock to trade 25
dlr to 30 dlr a share range for as long as it takes for a
decision to made in the case.
 Reuter
