NEW YORK — Creditors of Texaco Inc., which is in bankruptcy proceedings because of the $10.3-billion lawsuit won by Pennzoil Co., are working on a plan that would reduce the amount of money that could be paid, sources close to the case said Friday.
"The plan is not a total settlement, but it limits the ultimate recovery (by Pennzoil) if the judgment against Texaco is affirmed," a source close to the creditors said.
The creditors are concerned that they may never be paid, and rather than face that possibility, they are seeking to limit the damage from a full judgment, sources said.
However, it is not certain that all the creditors, Texaco and Pennzoil will back the plan.
In 1985, a Texas jury found that Texaco's acquisition of Getty Oil illegally interfered with an earlier agreement Pennzoil had to buy a stake in Getty.
Texaco filed for Chapter 11 bankruptcy last April to avoid posting a bond for the Pennzoil judgment while it sought review by the Texas Supreme Court. That appeal was recently denied, leaving only an appeal to the U.S. Supreme Court between Texaco and the payment of the $10.3-billion award, the largest in U.S. history.
Acrimony Dismays Creditors
Creditors, owed some $6 billion, have been pushing both companies to settle the case so that Texaco could move out of Chapter 11 and repay its debts. Under Chapter 11, a company can keep operating while it seeks to reorganize and does not have to pay its creditors.
If the award is upheld, the biggest creditor will be Pennzoil Co. But to the dismay of others owed money, the two oil firms have shown little interest in a settlement and the acrimony has grown as the case has snaked its way through the courts.
Under the plan, Texaco would make an initial payment to Pennzoil while it appeals the case to the U.S. Supreme Court. If Texaco loses, Pennzoil will be paid another sum, but the total would remain less than than the full judgment. If Texaco wins, however, Pennzoil will still keep the initial payment.
But at least one major creditor had questions about the plan.
"It will only work if Texaco and Pennzoil agree to it," the creditor said. "If both sides agree to that then they should be able to settle the entire case."
The bankruptcy sources said no figures have been put forward about size of either payment.
"We are presently in discussions with both sides (Texaco and Pennzoil) about the plan," one source said.
The general creditors are meeting Tuesday.