After 20 months of court proceedings, a round of applause from attorneys and executives heralded Smith International's emergence from Chapter 11 bankruptcy Thursday.
Bankruptcy Judge James R. Dooley signed orders confirming Smith's $289.5-million reorganization plan following a two-hour hearing. About 11,000 Smith creditors and shareholders "overwhelmingly accepted" the plan, according to Richard T. Peters, Smith's bankruptcy attorney. The plan, which becomes effective Dec. 31, calls for Smith's creditors to receive full reimbursement.
"I think the true character of the company was borne out during this tough time," said Jerry Neely, chairman and chief executive of the Newport Beach oil services company.
Thursday's action means that Smith will meet a Dec. 31 deadline to settle a 14-month-old patent infringement suit filed over Smith's use of a patented rubber seal in a line of drilling bits.
The settlement in favor of Hughes Tool, originally set at $205 million by a Los Angeles federal court judge, precipitated Smith's decision to file for bankruptcy protection in March, 1986.
In June, shortly after Baker International merged with Hughes Tool to become Baker Hughes, the combined firm agreed to accept $100 million on the condition that it be paid by the end of the year.
Smith will pay Baker Hughes $90 million in cash and a $10-million note due in 2 1/2 years.
"We are pleased," said Daniel M. Lewis, an attorney representing Baker Hughes. "The Dec. 31 deadline served its purpose--to get our money."
Attorneys representing Smith shareholders and its unsecured creditors' committee testified that they support the reorganization plan.
Several Smith debt holders previously filed objections to the plan, but withdrew them after further negotiations with the company.
Judge Dooley heard and overruled an objection raised by an attorney for Chevron USA and 12 other companies that, along with Smith, dumped industrial wastes at a Monterey Park landfill site about 10 years ago.
The U.S. Environmental Protection Agency has required Smith and the other companies to help pay for the $300-million cleanup of the site. Smith has already settled with the EPA, agreeing to pay no more than $5 million.