(COMTEX) A: Conseco: It's time to restructure
Aug 10, 2002 (The Deal via COMTEX) -- Two years after taking on the granddaddy
of turnaround projects, Gary Wendt is crying uncle.
The chief executive of Conseco Inc. said Friday, Aug. 9, that the company's
effort to remake itself "is no longer the best course" and that he had hired
Lazard and Kirkland & Ellis to restructure the Carmel, Ind.-based financial
services conglomerate.
Despite a string of selloffs intended to raise cash to pay off debt, Conseco
said it has exercised a 30-day grace period rather than make a bond interest
payment due this month.
A "radical change in the company's capital structure," as one rating agency
called for last week, is required, Wendt said in a statement.
Wendt's concession comes amid a worsening financial scenario for Conseco. The
company's shares have fallen more than 90% on the New York Stock Exchange to
about $1. Of $6 billion in total company debt, about $1.65 billion is due before
the end of 2003. "The problem is the overleveraged capital structure of the
parent," Wendt said.
"They looked out past '03 and saw what was coming and said, 'You know what?
We're not going to make it,'" said Mike Rettinger, an analyst with McDonald
Investments. "The only question now is will it happen in or outside of
bankruptcy."
Lazard, led by restructuring chief Barry Ridings, and Kirkland, led by partner
Matt Kleinman, are expected to begin renegotiating loan agreements with
Conseco's bank syndicate. The banks are led by Bank of America Corp.
It would be the second time banks have revised their agreement with Conseco. In
March, Conseco said the first $352 million generated from asset sales will be
retained by Conseco, the next $313 million will be paid to banks. The next $250
million will be split between Conseco and the banks.
Conseco sold its variable life insurance business for $50 million and sold
Manhattan National Life Co. for $48.5 million earlier this year. Lehman Brothers
Inc. advised on those sales.
Meanwhile, a faltering Conseco means trouble for Thomas H. Lee Partners. The
Boston-based private equity shop pumped $500 million into the company in
exchange for 2.6 million convertible shares that can be swapped for common stock
for $19.25.
"Conseco management and the board are working to address these issues and Thomas
H. Lee Partners supports these efforts," said Paul Del Colle, a spokesman Lee
said. "The firm is clearly interested in a successful outcome.'"
Added McDonald's Rettinger, "This only comes as a shock because it's so out of
character. Conseco has been in trouble for a long time. Why didn't they wait it
out?"
by David Weidner
URL: thedeal.com |
