clock menu more-arrow no yes

Filed under:


The legal battle between Texaco and Triad America in U.S. Bankruptcy Court this week may be technical, but picking sides has seldom been easier.

If you own Texaco stock, you want Texaco to win its bid for $9.4 million out of the bankrupt Triad America estate.If you are one of Triad America's creditors, you want Triad America to fend off Texaco's grab for $9.4 million and win its own grab for $2.2 million out of Texaco's coffers.

If Triad defeats the $9.4 million claim and wins its own $2.2 million claim against Texaco, Triad creditors may receive up to 64 cents back for every dollar they lost to Triad America, said Danny Kelly, attorney for Triad trustee R. Todd Neilson. If Triad loses this two-week trial, creditors may get only 50 cents on the dollar, he said.

"That won't mean a lot to small creditors, but it could mean hundreds of thousands of dollars to large creditors. To Sheraton, it will make a difference in the seven figures," Kelly said.

The feud between Triad and Texaco hinges on a guaranty Triad made to Texaco in 1985. At that time, Oasis Oil - a California subsidiary of Triad - was buying crude oil from Texaco, refining it and reselling it, Kelly said.

But Oasis Oil was $17 million behind on its payments for the oil. Triad stepped in and promised Texaco that if Oasis could not pay its bills, Triad would. Triad gave Oasis $2.2 million to cover part of Oasis' debt.

In January 1986, Oasis filed for bankruptcy. The company still owed Texaco $9.4 million. Texaco now wants the Triad America estate to honor its guaranty and pay the $9.4 million Oasis debt.

Neilson sued Texaco over its attempt to enforce the guaranty, claiming it can't be enforced because Triad received nothing in exchange for the guaranty and the company was insolvent at the time it extended the guaranty.

"Triad America can't guarantee payment of another company's debts when it can't pay its own creditors," Kelly said.

Besides trying to void the guaranty, Neilson wants to get back the $2.2 million Triad paid to Texaco to cover Oasis debt. The money would then be distributed to Triad creditors.

Much of the time in trial is devoted to the details of the complex contract between Oasis and Texaco and detailed review of Triad America's finances at the time it made the guaranty. U.S. Bankruptcy Judge John H. Allen will rule on the validity of the guaranty.