Word: texaco
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Meanwhile, the U.S. was faced with the spectacle of a healthy corporation sheltering under laws ostensibly intended for the weak and ailing. As Anthony Ludovici, an oil analyst for the Tucker, Anthony & R.L. Day investment firm, put it, "While Texaco will be in bankruptcy, Texaco won't be a bankrupt company...
...enacted in 1978, which no longer require corporations to demonstrate that they are insolvent, the oil giant is immune, for the moment, from far more than the debilitating bond judgment. Pennzoil can no longer slap liens, as it was reportedly preparing to do, on up to $8 billion in Texaco assets. With $3 billion already in reserve, Texaco no longer has to pay $630 million worth of annual interest on $7 billion in normal business debts. Nor is it required to pay dividends on 242.3 million outstanding common shares, an estimated saving this year of nearly $727 million...
...Texaco's future financial position may be even better. Only Texaco's principal holding company and two financial subsidiaries are huddling within Chapter 11. Dozens of operating subsidiaries around the world are carrying on business as usual. They will help keep Texaco's annual cash flow close to $3.6 billion and its anticipated profit this year higher than $650 million -- all outside Pennzoil's direct grasp. That wrinkle took Chairman Liedtke by surprise. As he told TIME, "I thought that when we were suing Texaco, we were suing all of Texaco." Liedtke has claimed that Texaco illegally transferred assets, including...
Ultimately, though, Texaco may pay a heavier price for its bold gambit. For one thing, all of Texaco's regular creditors have been bludgeoned by the Chapter 11 device; their goodwill is important to the oil firm's longer-range survival. Among others, Texaco owes Chase Manhattan Bank $2.95 billion and Manhattan's Bankers Trust and Manufacturer's Hanover Trust an additional $1.5 billion. Outwardly, many of Texaco's creditors and lenders are serene about the situation. But at one major Manhattan bank with several hundred million dollars' worth of Texaco corporate notes on deposit, a senior executive admits...
...Texaco stockholders are likely to feel anxious soon. Some of them "could be wiped out" by the bankruptcy, according to one legal expert. Many of the large institutional investors that hold Texaco stock are forbidden by various rules and regulations to own securities that fail to pay dividends. But even those that are not so constrained are unhappy. Harold Ofstie, for example, is portfolio manager of Philadelphia-based Delaware Management, which owns 3.7 million Texaco shares. The bankruptcy filing means a projected loss of $11.1 million in annual dividend income for Delaware. Says Ofstie: "We understand the reasons why Texaco...