<font color=red>Conseco's Wendt Says He Expects Debt Rating Upgrade (Update1)
9/25/0 17:11 (New York)
Conseco's Wendt Says He Expects Debt Rating Upgrade (Update1)
(Adds analyst comment and closing stock price.)
New York, Sept. 25 (Bloomberg) -- Conseco Inc.'s chairman
Gary Wendt said the insurer ought to have its investment-grade
credit rating restored within six months following a series of
asset sales and a new pact with banks to extend debt payments.
``We'll get it back well before'' March 2001, said Wendt in
an interview following a meeting with analysts and investors in
New York. A higher rating will cut its borrowing costs.
The meetings followed an agreement announced last week with a
group of 25 banks led by Chase Manhattan Bank and Bank of America
that allows it more time to repay more than $2 billion. Today,
A.M. Best Co., a rating agency, indicated an upgrade could come,
raising its outlook on the insurer to ``positive'' from
``developing.'' It rates Conseco a ``B++''.
``We don't expect them to move quickly but we're not
borrowing much money right now,'' said Wendt. ``We hope to work
with A.M. Best to show them the quality of what we've done and we
expect to get the (investment-grade) rating back shortly.''
Wendt said if Conseco regains it ``A-'' rating from A.M. Best
it wouldn't need to buy reinsurance to shore up its balance sheet,
as it previously announced it would do. Wendt said the reinsurance
was now viewed as a last resort.
Analysts estimated Conseco's borrowing costs could rise by
about $35 million a year under the terms of the debt rescheduling
agreement, but some said the breathing room gained by the company
probably justifies the cost.
``That would be a victory,'' said Paul Goulekas, an analyst
at Conning & Co. ``That's supportable.'' he said.
Earnings
Daniel Loeb, a money manager for Third Point Partners LP,
which owns Conseco debt, said a decision to forego reinsurance
would be ``a big disappointment to investors because it suggests
(Wendt) couldn't find the coverage at an acceptable price.''
Moreover, he said information disclosed by Conseco at today's
meeting suggests that contrary to analysts' forecasts, the company
might not earn any profit in the second half of this year.
According to a survey of analysts by First Call/Thomson
Financial, Conseco is expected to report third quarter earnings of
22 cents a share and fourth quarter earnings of 25 cents a share.
For his part, Wendt conceded that Conseco's earnings would
continue to disappoint until 2001. ``We are being very
conservative in the last half of the year,'' said Wendt. ``I don't
believe Conseco is an earnings per share stock, it's a recovery
stock,'' he said.
Conseco shares slid 25 cents to 8.44 in New York trading. |
