COR TEXACO <TX> SAYS IT CAN'T POST MORE THAN 1 BILLION
Texaco Inc, in documents filed with a
Texas state appeals court, said a ruling forcing it to post a
bond of more than one billion dlrs as security for a 10.53
billion dlr judgment would halt its credit agreements and force
the company into bankruptcy.
    A hearing is scheduled Monday on Texaco's motion to reduce
the amount of bond required by Texas state law to secure a 1985
judgment in favour of Pennzoil Co <PZL> in a dispute over the
acquisition of Getty Oil.
    Pennzoil today said it proposed to the court that Texaco
secure its bond with assets valued at about 50 pct of the bond.
    It said this would not force Texaco into bankruptcy.
    Richard Brinkman, Texaco's chief financial officer, said in
a newly filed affidavit that the company was willing to use its
65 mln shares of <Texaco Canada Inc> as collateral for a letter
of credit or loan to provide security to Pennzoil.
    The Canadian unit's stock, valued at about 1.8 billion
dlrs, was returned to Texaco earlier this week after being held
as security by a federal district court in New York while
Texaco awaited a ruling by the U.S. Supreme Court. Brinkman
estimated that Texaco could borrow no more than one billion
dlrs using its Canadian subsidiary stock as collateral for a
loan.
    Texaco, he said, was unwilling to pledge the stock of its
other foreign subsidiary corporations as security because the
stock is not widely traded and its market value was unclear.
    Brinkman also said the company had already lost access to a
four billion dlr revolving credit line since the initial jury
verdict against Texaco.
    Texaco had been able to raise working capital by selling
about 700 mln dlrs in receivables to a group of banks since the
judgment, he said. The banks earlier this week notified Texaco
that they would not purchase any additional receivables because
of the company's uncertain status, Brinkman said.
    Four other credit agreements for 1.15 billion dlrs would
also be cut off if a judgment of more than four billion dlrs is
outstanding against the company and it is unable to obtain a
stay, Brinkman said.
    "Since the Supreme Court decision on April 6, many other
suppliers to Texaco have notified Texaco that their dealings
with it are under review and a number have demanded cash
payment or terminated their dealings with Texaco," he said.
    The Supreme Court overturned a lower federal court decision
to cut Texaco's bond to one billion dlrs, saying the issue
should first be considered in Texas courts.
    In a separate affidavit, <Morgan Stanley & Co> Managing
Director Donald Brennan also said Texaco would be forced into
bankruptcy if the company were forced to provide Pennzoil with
security exceeding one billion dlrs.
 REUTER
