JUMBO TROUBLE FOR TEXACO
Will European investors shun corporate America in 1986? The $11.1 billion awarded against Texaco in a US court may have far-reaching effects for all US corporate borrowers. Texaco's two jumbo convertible Eurobonds, the 11 3/4% and 11 7/8% deals, fell to a level around 95 after the December 11 ruling in Pennzoil's favour, representing a 14-point loss over the preceding month. Bondholders--80% of whom are said to be Swiss investors--became the latest victims of the hyper-aggressive mergers and acquisitions industry.
Texaco's Eurobonds were only one example among many of how outstanding US corporate debt has been affected by takeover or anti-takeover activity during 1985. In 1986, European investors will think twice before taking on the risk of even the most familiar names. And it may be that credit analysis-- at least of US corporates--has become so complex that the big funds will simply allocate more room in their portfolios to sovereign and supranational paper, especially US Treasuries.
Listed below are all the US corporate names with outstanding Eurobonds whose Standard & Poor's debt ratings have been affected in 1985 by M&A, as well as those placed on CreditWatch. A cursory glance reveals that only Richardson-Vicks emerged stronger.