LOS ANGELES — Smith International Inc. won a week's extension Tuesday for filing a bankruptcy reorganization plan because its creditors agreed that intense daily negotiations are bringing the parties closer to agreement on a debt-repayment program.
It was the latest of several extensions granted Newport Beach-based Smith, which filed for protection from creditors under Chapter 11 of the federal bankruptcy law last year after it was ordered to pay Hughes Tool Co. (now Baker Hughes) $205 million in a patent-infringement suit.
U.S. Bankruptcy Court Judge James R. Dooley set next Tuesday as the new date for a hearing on the plan.
In a bid to prevent further delays, an attorney for Baker Hughes--Smith's largest creditor--said that if the oil toolmaker does not file a reorganization plan by Aug. 4, Baker Hughes will demand payment of the full judgment, instead of the $95 million settlement the two companies agreed to last month.
"We undertook that sacrifice in an effort to move the process along," said Daniel M. Lewis, an attorney representing Baker Hughes. "We anticipated a quick reorganization and a quick payout."
One of the conditions Baker Hughes imposed on the deal was that Smith pay the settlement in full by Dec. 31--a deadline that would involve prompt preparation of a reorganization plan and its approval by most of Smith's creditors so the company can spend the funds.
As part of the settlement agreement, Baker Hughes has also asked a Washington, D.C., appeals court to delay ruling on Smith's appeal of the patent case until early August.
If Smith does not file a reorganization plan by Aug. 4, Lewis said, Baker Hughes "will withdraw (the settlement agreement) and the appeal will go forward."
After Tuesday's hearing, Smith's bankruptcy attorney, Richard F. Broude, said the company is "optimistic that Baker Hughes' concerns will be ameliorated."
Broude also said he is hopeful that Smith's plan will be filed to meet next week's deadline.
Meanwhile, intense negotiations between Smith and its creditors continued Tuesday afternoon in Los Angeles.
"We are optimistic we can get together in a week," said Bernard Shapiro, an attorney representing Smith's unsecured creditors. "If not, we will request permission (from the court) to file our own plan."
"Negotiations are going on constantly, and we are hopeful a consensual plan will be reached," said Richard Wynne, the attorney representing Smith's shareholders.
On Wall Street, Smith stock closed at $10 a share, down 75 cents.