CNC bondholders calling for restructuring!!!
Won't be good for the stock, homeboy.
Mr. P$nk
Carmel, Indiana, Aug. 15 (Bloomberg) -- Conseco Inc. said in a filing it expects to raise $2 billion over the next 12 to 15 months from selling assets
and overhauling its consumer-lending unit as the insurer moves to shore up its finances.
Conseco also said it paid $117.1 million in advisory fees during the second quarter to Lehman Brothers Holdings Inc. and other investment banks.
Analysts have said Conseco needs to raise the $2 billion to regain its investment-grade credit rating. Conseco has debt of $1.4 billion due by Sept. 30,
and said in a Securities and Exchange Commission filing that the extension of its bank line of credit will be required because of the time needed to sell
the assets and complete the restructuring.
``As a bondholder I'm shocked and outraged at the magnitude of the fees paid to Lehman Brothers and the other investment banks,'' said Daniel Loeb,
a money manager for Third Point Management Co. LLC, which holds Conseco debt.
``Conseco needs to take immediate action to restore its balance sheet before the underlying businesses deteriorate any further,'' he said. ``The only way
is to enter a full-fledged restructuring agreement. Bank of America and Conseco's bondholders should be willing to reduce Conseco's debt in exchange
for a meaningful equity stake.''
James Rosensteele, a Conseco spokesman, said the company had no plans to issue new equity. He said the company had no comment on the timing or
amount of asset sales.
The Carmel, Indiana insurer previously said it would sell its equity stakes in Tritel Inc. valued at about $600 million and Argosy Gaming Co. valued at
about $200 million. The insurer also said it would eliminate 2,000 jobs at Conseco Finance and sell or close five non-strategic divisions of the unit to
save about $150 million.
Cash Restrictions
The company said its ability to use newly raised cash is substantially limited by restrictions in agreements with Lehman. Conseco said it's in discussions
with Lehman to ease the restrictions.
Conseco said the $117.1 million in fees included $20 million paid to Lehman for assembling a group of investors to buy Conseco Finance; $24 million
in fees paid to other investment banks related to the scrapped sale of Conseco Finance; $48.1 million to issue warrants to Lehman for a 5 percent
stake in Conseco Finance; and $25 million in fees paid to Lehman to purchase $1.3 billion of whole loans from Conseco Finance.
Conseco said it recognized a net loss of $58.5 million from the sale of its credit card and subprime auto financing and servicing companies.
The company also said it recognized a $21 million expense during the second quarter related to warrants issued to GE Capital Corp. to release Gary
C. Wendt from his non-compete agreement. Wendt was named Conseco's chairman and chief executive on June 29.
Conseco shares, down 58 percent this year, fell 3/16 to 7 7/16 in New York trading.
Aug/15/2000 16:25 ET
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