TEXACO SEES BUSINESS LITTLE HIT BY BANKRUPTCY MOVE
Texaco Inc <TX> said its decision to
file for protection under Chapter 11 of the U.S. Bankruptcy
code will not affect the majority of its businesses.
    It said its subsidiaries, which account for 96 pct of its
32.6 billion dlrs in revenues and 79 pct of its net property,
plant and equipment, were free of the action.
    Only parent holding company, Texaco Inc, and operating
subsidiaries, Texaco Capital Inc and Texaco Capital N.V, are
affected, it said.
    But the company said it was likely to suspend its 75 cents
per share quarterly common stock dividend and halt repayments
on debts of some 6.8 billion dlrs.
    Texaco said it filed for Chaper 11 because suppliers were
demanding cash payments and banks were withholding loans as a
result of a legal dispute with Pennzoil Co <PZL>.
    Texaco is fighting a Texas law requiring it to post a bond
of more than 10 billion dlrs before it can appeal a 1985
judgment that ruled it illegally interfered with Pennzoil's
1984 acquisition of Getty Petroleum Corp <GTY>. The bond almost
matches the damages awarded against Texaco.
    Should Texaco fail to place the bond, Pennzoil could begin
to attach its assets to secure the judgment.
    Last Monday, the Supreme Court overturned a decision to cut
Texaco's bond to one billion dlrs, and sent the issue back to
the Texas courts.
    Analysts said the bankruptcy filing effectively froze all
Texaco's obligations while it continued to appeal the merits of
the Pennzoil lawsuit.
    "Attempts last week to win a compromise on both the bond
issue and the larger dispute failed," James Kinnear, Texaco's
president and chief executive officer, told reporters.
    Kinnear said Pennzoil's disclosure in court papers on
Friday that it wanted to extend the bond issue hearing until
the end of April, pushed Texaco further towards Chapter 11.
    Pennzoil had asked Texaco to post a 5.6 billion dlr cash
bond and to reduce its dividend to not more than 50 pct of
earnings. Pennzoil also wanted assurances that Texaco would not
sell any assets, Kinnear said.
    Texaco offered to put up one billion dlrs in a letter of
credit and agreed not to let the value of its assets fall under
11.1 billion dlrs, he added.
    Joseph Jamail, a Houston attorney for Pennzoil, said the
company had made its latest settlement offer to Texaco on
Saturday and was taken by surprise when Texaco filed for
bankruptcy.
    He declined to reveal the amount of the proposal, citing a
confidentiality agreement between the two companies. "Texaco
told us they would get back to us but instead they chose to go
to bankruptcy court," Jamail said.
    Attorneys for Pennzoil said they believed the company would
prevail in court appeals, adding that Texaco's assets were
ample ultimately to pay the Pennzoil judgment in full.
 REUTER
