WHITE PLAINS, N.Y. — A federal court Tuesday granted Texaco shareholders veto power over any deal reached between Pennzoil and Texaco creditors, a move that could further complicate the companies' long legal battle.
The order, which clarifies an oral decision by U.S. Dist. Judge Howard Schwartzberg last week, grants shareholders far more power than had been expected, Pennzoil lawyers said.
Lawyers familiar with the case say Texaco creditors may be willing to settle the oil giant's liability for enough money to ensure that their owns claims are repaid but not enough to send Texaco's stock price high enough to satisfy its shareholders' demands.
"What I had in mind is that the equity committee also agree (to a settlement)," Schwartzberg said Tuesday.
Lawyers involved in the case said the ruling gives Texaco's shareholders committee, its creditors committee and Pennzoil a chance to settle the $10.3-billion dispute between the two companies and to propose a plan of reorganization to the court.
But a source close to Texaco said the latest court order will also radically alter the negotiating posture of all parties. He said he expected all sides to reassess their positions before further settlement talks are convened.